Last week’s gross domestic product (GDP) report confirmed that our economy continues to grow (2.5 percent in the third quarter), although not as quickly as we would like. The fears of a “double dip” recession didn’t come to pass (if anyone in the DC area is interested in a triple dip, head to Ben and Jerry’s from 4 to 7 for their 3-dips-for-3-bucks special.). One reason why the economy isn’t growing faster is that budget constraints are forcing continued and historically deep contractions in state and local government spending. Measures within the American Jobs Act can help bridge the gap.
These cuts in state and local government spending are evident in the GDP data and also in the employment data (the October payroll data will be released this Friday). State and local spending and investment decreased 5.3 percent in real terms since spending peaked in the fourth quarter of 2007, by far the deepest 15-quarter decline in spending in the post-WWII era. Job losses that have followed from these budget cuts total 646,000, or 3.3 percent, since state and local employment peaked in August 2008.
So far this year state and local governments have been cutting jobs at the same pace that private sector firms are adding them. Over the first 9 months of the year, private payroll employment has grown 1.2 percent (1.3 million jobs) while employment in state and local governments declined by 1.2 percent (234,000 jobs).