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State, Local Hiring Are Finally Joining the Recovery

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State and local governments have been adding jobs recently, a signal that better employment numbers could be around the corner.

The latest employment numbers show a job market that is still in slow recovery, but one underlying trend suggests the economy may have finally turned a corner, raising hopes for broader improvement in 2014.

State and local government hiring, which has been in a free fall for most of the past four years, has been steadily inching upward in recent months, a sign that local governments are finally seeing enough on-the-ground economic improvement and enough pickup in tax collections to hire more employees. Should that trend hold and expand, it would add a significant boost to overall employment growth and could accelerate the recovery.

From now to the end of 2014, government payrolls should go up by 350,000 jobs, or 10 percent of the total number of new jobs added next year, says Daniel White of Moody’s Analytics.

That figure would probably be even higher had the federal government not axed jobs following several years of cuts. Despite the federal drag, government employment should represent around 10 percent of the overall employment gains next year, making government the second fastest-growing sector after construction, White said.

State governments added 8,000 jobs in November, while their local counterparts added 6,000, with much of that increase driven by education hiring. Since June, states have hired 40,000 new workers. Their local counterparts have created almost 60,000 jobs this year so far.

The federal government, on the other hand, has been moving in the opposite direction, largely due to the mandatory budget cuts under the sequester. Federal employment fell 7,000 last month, contributing to the nearly 60,000 jobs shed by the federal government this year.

State and local governments employ 1 in 7 workers, collectively making them one of the largest employers in the country. The legions of teachers, firefighters, university administrators and others who are included in this category took a significant hit during the worst years of the recession, when states laid off hundreds of thousands of workers in the face of collapsing revenues. Now, though, their ranks are up, although growth is still slow.

The latest jobs report from the Bureau of Labor Statistics, which showed the overall unemployment rate falling to 7 percent, is the latest in good news for state and local governments. Last week the Census Bureau reported that spending on construction increased 0.8 percent in October, driven by a sharp 3.9 percent gain in state and local government construction spending. And last month, the Bureau of Economic Analysis reported that higher spending by state and local governments helped them contribute to overall growth in gross domestic product in the second and third quarters of this year. Before that, state and local governments had been holding back growth for 13 of the past 14 quarters.

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