Oregon Office of Economic Analysis

One quick follow-up on June’s employment report, and more food for thought.

Some discussion surrounding the latest report distinguishes between the gains in the private sector and the losses in the public sector and with good reason. As shown in the graph below, total nonfarm employment closely follows the private sector just due to the math as the public sector is a much smaller portion of overall employment than is the private sector. Also, the private and public sectors follow different growth trajectories over the business cycle (notice the differences in the green and red lines). For June, Total Nonfarm employment has increased 1.28 percent year-over-year. This is a blended result of the private sector increasing 2.27 percent while the public sector contracted 3.00 percent.

Given that the private sector is growing again, how does the current growth compare to previous expansions? The second graph attempts to answer this question. The blue line represents month to month employment changes in the private sector – that is, how many private sector jobs were created in the past month. In June, 3,900 private sector jobs were created and the dashed, purple line shows this level of job creation for comparing to the previous years. The red lines represent the average monthly private sector job creation for each time period it covers. The first red line covers the Jan ’92 to Dec ’99 period, while the second red line covers the Jan ’04 to Dec ’07 period. During the 8 years during the 1990s, private payrolls averaged gains of approximately 3,200 per month, while the 4 years during the mid-2000s averaged 2,950 per month. June’s gains were slightly above these averages, however private sector gains in Oregon over the past 11 months (Aug ’10 to Jun ’11) have averaged 2,950 – or exactly the same growth as seen during the last expansion.

What this indicates is that the private sector employment has returned to trend growth, or rates that are approximately what one would expect during an economic expansion. There has not been, nor is there expected to be, a v-shaped recovery, which is unfortunate given the massive hole we fell into during the recession. Clearly, the public sector employment cuts are beginning to hit the official employment figures – that is, public sector losses are a drag on the employment situation and this is expected to continue in the coming months, or longer.