(Bloomberg Opinion) -- While overall U.S. nonfarm payroll employment went up by 201,000 in August, according to today’s jobs report from the Bureau of Labor Statistics, government employment fell by 3,000, to 22.3 million. That put government’s share of employment at 14.97 percent, the lowest it’s been since 1957.
As noted in the chart, this does not include uniformed military. If it did, the drop since the mid-1970s would be even more pronounced, given that there were 2.1 million military personnel on active duty in 1975 and just 1.3 million as of this June.
Federal government employment, it turns out, has been shrinking as a share of total employment since 1952. State and local governments kept adding workers at a faster pace than the economy as a whole through the mid-1970s, and their shares of total employment held relatively steady for decades after that, but they have dropped over the past couple of years to levels last seen in the mid- to late 1960s (this chart starts in 1955 because that’s how far back the state and local data series go).
What is the significance of all this? I wrote a column two years ago on declining government employment that was headlined “Big Government Keeps Getting Smaller,” and I heard from a lot of readers who thought that interpretation was nonsense because (1) there are other ways in which government can be big (spending, regulatory reach) than just head count, and (2) that head count doesn’t include government contractors. It still doesn’t, because the BLS doesn’t sort employment that way. New York University public service professor Paul Light did make some estimates of government contract and grant employment in a report published last September, and they showed it going from 4.9 million (2.4 times the official civilian federal workforce) in 1984 to 7.2 million (3.4 times) in 2010 before dropping back to 5.3 million (2.6 times) in 2015. So that doesn’t change the picture that government’s share of total employment has dropped since the 1980s, and it indicates an even sharper overall drop over the course of the current economic expansion than the BLS numbers show.
Early in this expansion, the contraction of government employment was not exactly great for economic growth, as state and local governments shed 255,000 jobs in 2010 and 278,000 in 2011 (federal employment held relatively steady). More recently, though, the decline in government’s share of total employment has been mostly a sign of the health of the private sector.
As for the longer-run decline in government employment, I can think of a couple of things to say about that. One is that it might also be mainly a sign of the health of the private sector and the U.S. economy as a whole. But having just written about how government investment in infrastructure, research and development, and other things is now lower as a share of gross domestic product than at any time since the 1940s, I do wonder at least a little whether we’re reaching a point where key tasks that the private sector isn’t great at performing are being neglected. Here, for example, is the breakdown of state and local government employment between education and all other functions:
Employment at public schools and colleges peaked in 2010, long after the rest of government employment did. Which makes sense, given that public school and college enrollment had kept rising from 32.1 million in 1955 to 52.9 million in 1975 to an all-time high of 68.2 million in 2011, according to the Census Bureau. Since then, enrollment has dropped as the biggest age cohorts of the giant millennial generation have entered their late 20s (a similar demographic falloff occurred in the late 1970s). It’s down 2.1 percent since 2011, while state and local government education employment is down 0.8 percent from its peak in 2008. So … no clear evidence of undue neglect there.
The government jobs numbers may, however, help explain a political landscape in which government workers have been losing clout. President Donald Trump’s announcement last week that he was canceling a planned 2019 pay hike for federal civilian employees may matter in a few congressional districts, but nationwide, there just aren’t enough federal workers to have much election impact. And state and local government workers’ shrinking share of overall employment has probably been a factor in such defeats as Wisconsin’s 2011 legislation limiting collective bargaining for most public employees.
To contact the editor responsible for this story: Brooke Sample at bsample1@bloomberg.net
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Justin Fox is a Bloomberg Opinion columnist covering business. He was the editorial director of Harvard Business Review and wrote for Time, Fortune and American Banker. He is the author of “The Myth of the Rational Market.”
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