The Private-Sector Recovery

[Lemur]

This is all typical for a recession. Private sector jobs react (drop) the fastest in response to a souring economy. As a result, tax receipts dry up and local/state governments are forced to cut their payrolls to stem the tide of red ink. Public sector jobs lag private in the recession and they lag in the recovery.

Um, no, that is the pattern of tax receipts, but not the usual response. In the '81, '90 and '01 recessions, deficit spending boosted the public sector, which boosted activity. In theory, at least, that spending should be dialed back when the economy is humming (doesn't work that way for the most part, but that's the idea). What is interesting about this recovery is that it is taking place despite government cutbacks. That's the observation I made in the OP.

Try this.

You kids with your computational devices and their softcore. Where is that "any" key? This thing keeps telling me to press "any" key. Where is it?

-edit-

FWIW, every economist I've read bears this out. Your argument seems to be, "But jobs aren't being created fast enough," which doesn't make a metric ton of sense, given that you are also in favor of austerity and total government paralysis. My point, which seems to be either missed or ignored in your comments, is that this is an interesting recovery in that it rests entirely on the private sector. Yet another article:



As we’ve noted before, the numbers back this up completely.

Obama’s been hobbled by public-sector layoffs during this crisis in a way his predecessor George W. Bush never was back in 2001. Where the federal government stepped up to prevent states and municipalities from laying off teachers and other government workers in previous recessions, it’s fallen on its face under Obama.

More broadly, government spending at all levels rose steadily under Presidents Reagan and both Bushes, but was mostly flat under Clinton and has gone negative under Obama.

How does this phenomenon contribute to current economic woes? It’s impossible to know for sure. But if like the Wall Street Journal you imagine that the massive government job losses in Obama’s first term had never happened, then, all else equal, the unemployment rate right now would be down near 7 percent, a full percentage point below where it actually is.

But that’s not how the economy works. If those state and local workers had kept their jobs, they would’ve been making and spending money the whole time, which would have further boosted the economy and provided jobs for other people in the private sector. Economists call this the multiplier effect, and it would’ve pulled the unemployment rate down further. On the flip side, if that demand had never been subtracted from the economy, fewer people would’ve grown discouraged by the economic outlook and would’ve remained in the workforce — instead of dropping out entirely as they did in reality, in large numbers. That would have pushed the unemployment rate back up.

But broadly, the unemployment rate would be significantly lower than it is in the absence of the past three years’ public-sector job losses, which in turn were the direct consequence of the austerity Republicans at the state and federal level demanded.