Local Government Jobs Decline for Second Consecutive Month

1200px-Bureau_of_Labor_Statistics_logo.svgIn May, employment rose sharply in leisure and hospitality, construction, education and health services, and retail trade. By contrast, government employment continued to decline sharply.

Overall, the unemployment rate decreased to 13.3 percent and 2.5 million jobs were gained across industries, surpassing the previous record of monthly jobs gained in a single month from 1983. While the May jobs report, released last week by the U.S. Bureau of Labor Statistics (BLS), reflects a dramatic change of course in labor market conditions, employment continued to decline in government (-585,000), following a drop of 963,000 in April.

On top of approximately 800,000 local government jobs lost in April, local governments lost another 487,000 in May. Employment also continued to decline in state government (-84,000), particularly in state education (-63,000).

According to the Maryland Department of Labor, employment for local governments across the state fell by 4.24% (-10,500) between March and April (May’s numbers are due later this month).

Local governments have lost 1.3 million jobs in just two months, revealing the massive financial challenges of county governments across the nation.

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Much of the decline in local government employment (-310,000) occurred in education systems, reflecting school closures. However, another 177,000 jobs are classified as non-education, including healthcare practitioners, social workers, law enforcement officers, maintenance crews, and construction workers.

As previously reported on Conduit Street, recent estimates indicate that state and local governments that state and local governments will face a shortfall approaching $1 trillion between now and the end of 2021.

State and local governments have less room than the federal government to increase spending in response to downturns. Most states and local governments, Maryland included, have balanced budget requirements, meaning that declines in tax revenues, if not offset by increases in federal funding, must be met by spending cuts or tax and fee increases.

The Board of Revenue Estimates last month reported that Maryland could face a $1.1 billion revenue shortfall in fiscal 2020, a $2.6 billion shortfall in fiscal 2022, and a nearly $4 billion shortfall in fiscal 2022.

According to the National Association of Counties (NACo):

Overall, since March, local governments experienced a decline of more than 523,000 non-education jobs. Individuals in these jobs are directly responsible for providing essential services and resources to counties, many of which are amid the ongoing public health crisis, subsequent economic hardship, and civil unrest.

Although the latest jobs report presents a national economy on the road to recovery, county governments are still reeling from the economic strain created by the pandemic. Counties are on the frontline of the COVID-19 response and have lost significant revenue because of efforts to contain the pandemic.

The continued decline in local government employment reflects the ongoing manifestation of those impacts at the local government level. Faced with major budget shortfalls, counties continue to work towards balancing support for the adversely affected members of the community and facilitating the reopening of local economies with reduced county staff levels.

Employment increased substantially in May for some of the hardest-hit industries such as leisure and hospitality, construction, education and health services, retail trade, and manufacturing industries.

At the issuance of the BLS jobs survey, 23 states had initiated reopening and the Paycheck Protection Program (PPP) funds had been distributed. The increased business activity paired with federal funding for small business paychecks stimulated job growth in these industries.

The leisure and hospitality industry rebounded with an increase of 1.2 million jobs — over half of the jobs gained in the economy — and the industry’s unemployment rate dropped to 35.9 percent.

Employment in the construction and manufacturing industries increased by 424,000 and 225,000 jobs, respectively, while healthcare increased by 312,000. Retail trade employment increased by 368,000 jobs following a decline of 2.3 million in April.

Stay tuned to Conduit Street for more information.

Useful Links

U.S. Bureau of Labor Statistics: The Employment Situation — May 2020

Conduit Street Podcast: Unemployment, From Every Angle

Previous Conduit Street Coverage: Report: Absent Federal Aid to State and Local Govts, 5.3M More Jobs Will Be Lost By 2021

Previous Conduit Street Coverage: Fiscal Leaders: State Revenue Shortfall Could Hit $4 Billion by FY 2022