Posted by: Josh Lehner | July 20, 2011

More on Public Sector Employment

This post follows yesterday’s private vs public employment picture and further examines the employment changes within the total public sector in Oregon.

First, the official employment figures released by the Employment Department (and U.S. Bureau of Labor Statistics) do not include seasonally-adjusted figures at sufficient detail to fully examine the sub-categories within the public sector. For this reason, our office uses the U.S. Census Bureau’s X-12-ARIMA program to seasonally-adjust the raw data provided by the Employment Department. As shown in the graph below, the official data and our office’s seasonally adjusted data match very closely over the past 20 years, with some discrepancies during July. According to the adjusted data, public employment in Oregon peaked around the end of the 2007-09 biennium (ignoring the impact of temporary Census hirings). Since then, public spending cuts have led to around 5,000 net job losses.

The second graph illustrates the three major categories within the public sector: federal government, state government and local government. (The sharp changes in 1996 are due to some employment being reclassified from state to local government.) Federal employment in Oregon has been very stable over the past 20 years and the increases for temporary Census hirings are evident by the spikes every 10 years. Also, although military employment is not included in the Employment Department survey, Oregon also has relatively little exposure to defense-related jobs. If anything, federal employment in Oregon is on a slight downward trend, which is even steeper over the past year or so. Due to the stable nature of federal employment in our state, the rest of the post focuses on state and local employment.

The next graph is for state employment and distinguishes between state employees in education and those that are not in education. For the purposes here, non-education is titled Administration and the Education portion is essentially the Oregon University System. Administration employment has stabilized over the past couple of years after initially increasing during the early phase of the recession, partially due to expansion of social safety net programs, partially due to a relatively healthy 2007-09 biennial budget. Since the 2009-11 BN budget was in place (July 2009 or the right edge of the gray recession bars), administration employment has leveled off and even declined slightly in recent months. State Education employment on the other hand has continued to grow strongly in recent years. The recession, resulting in less job opportunities, has pushed enrollment in higher education up which means more professors, instructors and employees in OUS. The increases in demand result in increases in employment.

The following graph makes a similar distinction between local education and local non-education, or administration. Local education is composed of both K-12 public schools and also community colleges (and Oregon Health & Science University), while Administration is mainly city and county governments.

Local administration has flattened out since the beginning of the recession with only small fluctuations, however local education has taken significant job losses over the past couple of years. Since Fall 2008 (the start of the 2008-09 school year), local education is down a little more than 6,000 positions on a seasonally adjusted basis or approximately 6 percent.

Finally, the table below quantifies the employment changes by sector over the business cycle. The three dates chosen are for the following reasons. Feb 2008: the month total nonfarm (and private sector) employment peaked in Oregon. This comparison allows one to calculate how each sector has performed since the beginning of the recession. Dec 2009: the month total nonfarm employment reached its low point, or trough, during the business cycle. This comparison allows one to calculate how each sector has performed since total employment began expanding again. Jun 2009: the last month of the old 2007-09 BN budget. This comparison allows one to calculate how each sector has performed since the 2009-11 BN budget was implemented, which, essentially, was the first austere budget at the state level.

Summary: Given the nature of how governments’ budget, the public sector is typically anywhere from 12-24 months behind the private sector business cycle. Clearly the public sector in Oregon is now feeling the impacts of the recession and the monthly employment reports are reflecting budget (and employment) cuts. The public sector expanded during the early phases of the recession to meet the growing demand for its social safety net programs, however recent budget cuts are shrinking the number of public sector employees. Thus far, the bulk of the cuts have taken place at the local education level, however, with a new 2011-13 BN budget now in place at the state level, expectations are for more layoffs in the coming months. According to our office’s most recent economic forecast, the public sector is approximately half way through this employment reduction process. Expectations are for continued job losses at all levels of government, however the bulk of the positions cut will most likely be state administration and local administration and education jobs. These losses will be a drag on both overall economic growth and the statewide total nonfarm employment figures over the coming months.

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