Governments Shed More Workers

From the Wall Street Journal | 9/5/09 | By SUDEEP REDDY and CONOR DOUGHERTY

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."

Getty Images

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."

Write to Sudeep Reddy at sudeep.reddy@wsj.com and Conor Dougherty at conor.dougherty@wsj.com