The Federal Government Should Subsidize Public Sector Jobs

Gov't Tail Wags the Labor Market Dog

Ironically enough, after it threw money in a thousand directions in order to keep companies from firing and to inspire them to hire new employees, it was the government this month who fired the most.

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The Federal Government Should Subsidize Public Sector Jobs

The latest monthly data on Announced Corporate Layoffs shows the government leading all sectors in job cuts in February. It feels like we were warning about this two years ago, and it is finally playing out in a meaningful manner, and doing its part in dragging the economy as well. We said there would be heads to roll in the ranks of the firemen, police officers, meter readers, sanitation workers, etc., and that is what is happening. As states balance budgets (because they have to), like well-publicized Wisconsin and New Jersey, the cost is born by government workers. When 2K teachers were fired in Rhode Island last week, and as Wisconsin's governor threatens similar actions, a barely growing economy faces a back-end drag as well.

Budgets are of course tighter due to softer tax collections, the result of job losses and lax economic activity. Even while Treasury Secretary Geithner states the worst of the income declines have already been seen, it sure doesn't seem that way based on anecdotal evidence. Challenger's data shows more than anecdotal, though, thus verifying the problem. The Government and Non-Profit Sector accounted for 32% of all layoffs in February. At 16,380 announced layoffs, it was about twice the nearest sector impact, which came from Retail at 8,360. Government and Non-Profit layoffs are up an astounding 89% year-to-date against the count from 2010.

Other areas related to government spending have also played an important role in 2011 layoffs. Aerospace & Defense, for instance, is the third most important job destroyer year-to-date, with 6,286 announced layoffs, nearly twice as many as a year ago.

"I would suggest the government find a way to allocate funds to keep folks working in public jobs, rather than paying them unemployment."

You will recall that early on in the crisis, federal government money was issued to the states in order to help them cope. It would seem a good idea now to something similar. I would suggest the government find a way to allocate funds to keep folks working in public jobs, rather than paying them unemployment. When we pay unemployment, we suffer as a nation through a cycle of inefficiencies. In the first phase of unemployment, the individual tends to take a break and sort of enjoy the time off. They may or may not spend less, depending on the individual.

Jobless Joe, we'll call him, will often not look for work during this phase, and so he is shifting in mental condition as well, from an organized state to a relaxed one. After a bit, reality strikes, and the newly unemployed person will begin to worry about the money running out. At that point, Jobless Joe will start looking for work in earnest. Unfortunately, today's labor market is highly competitive, with about 15 million people unemployed across the country. Meanwhile, American companies are not hiring at a healthy pace either.

If Jobless Joe does not find a job through this phase, he progresses to a phase where he loses his skills that have been out of use for too long. He becomes unemployable, according to some labor market experts. Joe will not be pleased with the situation either, as he will have to take a pay cut and perhaps start at a much lower level position than he was used to. Thus, it makes a whole lot of sense to keep Americans working. We should consider looking into finding a way to subsidize job security in the public sector temporarily. Clearly, we need to continue to inspire economic growth for the private sector as well, as this would cure all wounds.



Article should interest investors in Paychex (Nasdaq: PAYX), Manpower (NYSE: MAN), Robert Half International (NYSE: RHI), 51Job Inc. (Nasdaq: JOBS), Monster World Wide (NYSE: MWW), Korn/Ferry International (NYSE: KFY), Administaff (NYSE: ASF), Kforce (Nasdaq: KFRC), TrueBlue (NYSE: TBI), Dice Holdings (NYSE: DHX), Kelly Services (Nasdaq: KELYA), SFN Group (NYSE: SFN), CDI Corp. (NYSE: CDI), Cross Country Healthcare (Nasdaq: CCRN), On Assignment (Nasdaq: ASGN), AMN Healthcare Services (NYSE: AHS), Barrett Business Services (Nasdaq: BBSI), Hudson Highland Group (Nasdaq: HHGP), StarTek (NYSE: SRT), RCM Technologies (Nasdaq: RCMT), VirtualScopics (Nasdaq: VSCP), American Surgical (OTC: ASRG.OB), Medical Connections (OTC: MCTH.OB), iGen Networks (OTC: IGEN.OB), St. Joseph (OTC: STJO.OB), General Employment Enterprises (NYSE: JOB), Total Neutraceutical (OTC: TNUS.OB), TeamStaff (Nasdaq: TSTF), Stratum (OTC: STTH.OB), Purespectrum (OTC: PSRU.OB), Corporate Resource Services (OTC: CRRS.OB), Bank of America (NYSE: BAC), J.P. Morgan Chase (NYSE: JPM), Goldman Sachs (NYSE: GS), Citigroup (NYSE: C), Morgan Stanley (NYSE: MS), Wells Fargo (NYSE: WFC), TD Bank (NYSE: TD), PNC Bank (NYSE: PNC), General Electric (NYSE: GE), Wal-Mart (NYSE: WMT), McDonald's (NYSE: MCD), Alcoa (NYSE: AA), American Express (NYSE: AXP), Boeing (NYSE: BA), Caterpillar (NYSE: CAT), Cisco Systems (Nasdaq: CSCO), Chevron (NYSE: CVX), DuPont (NYSE: DD), Walt Disney (NYSE: DIS), Home Depot (NYSE: HD), Hewlett-Packard (NYSE: HPQ), IBM (NYSE: IBM), Intel (Nasdaq: INTC), Johnson & Johnson (NYSE: JNJ), Kraft (NYSE: KFT), Coca-Cola (NYSE: KO), 3M (NYSE: MMM), Merck (NYSE: MRK), Microsoft (Nasdaq: MSFT), Pfizer (NYSE: PFE), Procter & Gamble (NYSE: PG), AT&T (NYSE: T), Travelers (NYSE: TRV), United Technologies (NYSE: UTX), Verizon (NYSE: VZ), Exxon Mobil (NYSE: XOM). The day’s earnings included Deere (NYSE: DE), Tiffany (NYSE: TIF), China Cord Blood (NYSE: CO) and Frontline (NYSE: FRO).

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