Monday, January 11, 2010

It's a Private Sector Recession

Make no mistake about that.

Robert Higgs has been digging around in the unemployment data and here is what he has come up with:
We find that the loss of employment has occurred entirely in the private sector: employment fell from 115.4 million persons in 2007 to 109.5 million persons in 2009, a decline that took private employment back to its level at the end of the 1990s. As private employment has collapsed since 2007, however, the government payroll has actually grown slightly from 22.2 million persons in 2007 to 22.5 million persons in 2009, which puts this class of employment roughly 1.7 million persons above its magnitude in 2000.

Monthly data for the most recent year display this difference starkly. From December 2008 to December 2009, total employment fell from 135.1 million persons to 130.9 million, while government employment remained essentially constant at 22.5 million persons. The government employees also enjoyed increased compensation during recent years. Nice work if you can get it: no risk of losing your job, plus practically iron-clad prospects of rising real compensation, notwithstanding that millions of former private-sector employees now find themselves without jobs.

What this means is that real productivity is likely to be way down, since the government counts bureaucrats and soldiers killing middle easterners as improving productivity. Since this is the only job growth area, the GDP number can be up, but don't let that fool you into thinking real productivity is up. Unless you get your jollies knowing that bureaucrats are out harassing the private sector, or that soldiers are blowing up a few Muslims, there's not much going on right now to increase your standard of living.

1 comment:

  1. Krugman has been living on the East Coast too long. Every European that I meet is absolutely agog when I tell them how cheap it is to live in Texas. When adjusting for PPP, Texas per capita income exceeds that of the East Coast by a good margin. He doesn't realize how truly poor California and the Northeast really are.