SEPTEMBER 5, 2009
By SUDEEP REDDY and CONOR DOUGHERTY, Wall Street Journal
State and local governments stood out as safe havens for workers during the recession's early stages. Now even they are laying off employees as officials rush to cut costs and balance budgets.
August marked the third straight month that state and local governments shed jobs, reflecting cutbacks prompted by declining income and property taxes. They accounted for the bulk of the 18,000 government jobs lost in August -- the U.S. Postal Service cut about 8,500 jobs as well -- and analysts expect the reductions to continue through much of the year.
The widening unemployment rate has a gender gap and men are feeling the brunt of it. WSJ's Jon Hilsenrath says thanks to the struggling manufacturing, finance and construction industries, unemployment for men is the highest its been in 27 years.
Despite billions of dollars in aid from federal stimulus programs, budget cuts across the nation are forcing employers that depend on those funds, such as local nonprofits, to scale back as well. The reductions are forcing more Americans into the ranks of the jobless at a time when private employers are doing little to absorb the 14.9 million people searching for work.
Government employment at the federal level is holding up better because the U.S. can borrow more easily while states and municipalities are often required to balance their budgets. Some of the cost-cutting at the state level is due to temporary shortfalls as receipts from income taxes and sales taxes dip. But a longer-lasting shift is also underway given severe declines in property values.
John Kelly, a Michigan state trooper, was laid off in June as the nation's highest-unemployment state grapples with a freefall in tax revenue. Budget troubles have been a constant during Mr. Kelly's five years on the state police force, which is the primary form of law enforcement in the state's many rural regions.
About two-and-a-half years ago Mr. Kelly's post -- based in Hart, Mich., on the western side of the state -- saved money by moving from a building to a trailer across the street. Officers were asked to save gas by driving no more than 60 or 70 miles in a day.
"You always hear rumors there could be layoffs, and then it happens," says Mr. Kelly, 42. "You would think that any law enforcement job is fairly secure."
As he looks for work, Mr. Kelly is living off unemployment and his wife's salary. The family saves by limiting grocery shopping to once a week. They didn't sign their two boys up for baseball; all the games and practices mean more money spent on gas.
Budget cuts by state and local governments are being felt far beyond public offices. WakeMed Health & Hospitals, a non-profit health care system in Raleigh, N.C., cut about 200 positions this week because federal and state reimbursements are expected to drop $35 million in the coming year. "We have taken extraordinary steps to cut out anything else we possibly could," chief executive William Atkinson said. "I don't think we have any choice but to do some reductions."
About a third of the cuts were managers, and none were nurses. And the system is adding jobs in other areas so the net reduction in jobs should end up below 50, he said.
Health care is one of the few sectors consistently growing nationwide, adding almost 28,000 jobs in August, though hospital employment dipped slightly. Health care-related employment is still expected to rise over the longer term across North Carolina despite hospitals' latest cuts, Mr. Atkinson said. Workers across the spectrum are seeing their income stagnate or decline. Friday's Labor Department report showed that workers' average workweek remained flat in August, while total hours worked fell 0.3%. Economists attributed a 0.3% increase in average hourly earnings to this summer's increase in the minimum wage. The jobless rate for men rose to 10.1%, well above the 7.6% rate for women, as male-dominated fields such as construction and manufacturing continued to bleed jobs. A broader measure of joblessness, which counts people who have stopped seeking work and those working part-time but who want full-time jobs, rose half a percentage point to 16.8%.
The hit to jobs within state and local governments, in part due to lower property-tax revenues, is a final blow from the housing decline weighing down the economy in recent years. Many of those workers are watching the latest leg of the job market fall, with little hope for a recovery before next year.
"I'd literally go dig ditches if I could, but the housing market is in such bad shape that I couldn't," said Todd Hawkins, a former mortgage banker near Charlottesville, Va.
Mr. Hawkins, 43, has been searching for a job since May, when he was cut from a sales position at a local small business after a year. Business is painfully slow for his wife, a real estate agent, and now the family's savings are running low after liquidating a retirement account last year.
The next step: Cashing out a life-insurance policy to support his kids, ages 2, 4 and 6. Still hunting for work, Mr. Hawkins said he doesn't expect significant improvement in the labor market until 2011. "I'm usually a glass-half-full guy, but I don't think jobs are just going to spring back."
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