Tags: Government | layoffs | economy | woes

NY Times: Government Layoffs Add to Economy’s Woes

By    |   Wednesday, 20 June 2012 11:51 AM

While the U.S. private sector is slowly beginning to add workers, state and local governments are moving in the opposite direction, threatening the country’s fragile economic recovery.

The total government workforce has decreased by 657,000 since April 2009, The New York Times reports. And the reductions have accelerated during the past three months.

State tax revenues are starting to rebound, thanks to the national economic recovery, but not enough to spark hiring. And property-tax payments remain constrained by the housing crisis.

Amid rising costs for healthcare, social services, pensions and education, 14 states plan to slash aid to local governments, the National Governors Association and the National Association of State Budget Officers say in a report.

That means more cutbacks in local government payrolls. More than 25 percent of municipal governments plan to axe workers this year, according to a survey by the Center for State and Local Government Excellence.

Moody’s Analytics estimates that if government layoffs continue the pace of early 2012, they will slice $15 billion of spending off the economy.

That’s discouraging, given that GDP growth already slumped to 1.9 percent in the first quarter from 3 percent in the fourth quarter.

Economists are concerned.

"Typically, the government offers a base level of support when the economy is weak, Scott Brown, chief economist at Raymond James, tells The Associated Press.” In this case, the government is actually contributing to the weakness of the recovery.”

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Wednesday, 20 June 2012 11:51 AM
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