How Our Incredible Shrinking Government Raises Unemployment and Hurts the Recovery
With normal post-recession government employment expansion, unemployment might be as low as 6.3 percent.
How is this recovery different from all other recoveries?
After every other recession since the early 1970s, government employment grew. In the four years following the end of the Great Recession, government jobs got the guillotine.
You can see the specialness of our recovery in this compelling graph produced by the Hamilton Project, comparing government employment changes in the four years of recovery after the last six recessions. Since 1970, government employment increased by an average of 1.7 million following a recession. After the Great Recession, government employment has fallen by more than 500,000.
"The policy differences have led to 2.2 million fewer jobs today," Michael Greenstone and Adam Looney write . With 2.2 million more government workers now, assuming the same labor force size, the unemployment rate wouldn't be 7.7 percent. It would be 6.3 percent.
That doesn't mean the "real" unemployment rate is 6.3 percent. It doesn't mean state and local governments should be 2.2 million workers flusher. But it highlights the fact that, in terms of U.S. government responses to recessions, this time is different.