Category Archives: The Economic Crisis

Non-Defense Federal Government Employment Has Fallen Under Obama, and Grew Under Bush

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(change, in thousands of jobs) Jan 2001 to Jan 2005 Jan 2005 to Jan 2009 Jan 2001 to Jan 2009 Jan 2009 to Oct 2011
Federal Govt Employment -35 66 31 49
Defense Civilian Employees -27.5 25 -2.5 63.5
Federal excl Defense -7.5 41 33.5 -14.5

Federal Government employment, other than civilian employees in the Defense Department, has fallen during the Obama Administration.  In contrast, it grew under Bush.

While the numbers are small, in particular relative to national employment (the Federal Government only employs about 2.8 million workers, out of a US labor force of 154 million, or just 1.8%), it is helpful to get the facts straight in the light of the continued Republican attacks that the Federal Government has boomed under Obama, and accounts for the continued weak economic and employment growth of the US.  The spokeswoman for Republican Congressman and Majority Leader Eric Cantor (Megan Whittemore), for example, charged in an email sent to PolitiFact (link here), that the only job growth that can be attributed to the 2009 Stimulus program was in government.  Yet as we saw in a posting made yesterday at this site (link here), total government employment in the US (mostly state and local) has fallen by close to 600,000 since Obama took office.  The purpose of this new post is to focus on what has happened to the Federal Government employment alone.

Federal Government employment is only less than 13% of total government employment in the US, so the changes here will not much matter overall.  But it is interesting that while there has been a very small growth in overall Federal employment since Obama took office (of just 1.8% total, or 0.6% annually), it has all been due to growth in civilian employees at the Defense Department.  The table above, drawn from data issued by the Bureau of Labor Statistics (US Department of Labor), presents the numbers.  The figures by the BLS on Defense Department employees are not seasonally adjusted, so none of the figures in the table above are either, for consistency.  However, seasonal adjustment does not make much of a change in Federal Government employment figures in any case.  The most recent available figures are for October.  It should also be noted that all employment figures of the BLS are for the civilian population, and hence exclude active military personnel in all categories.

As is seen, while the number of all Federal employees rose by 49,000 under Obama, the Defense Department civilian employees grew by 63,500, so that Federal employment excluding Defense fell under Obama by 14,500.  It is also interesting to note that Federal employment grew under Bush, all in his second term, with an increase of 33,500 non-Defense Federal workers over his two terms together (and by 41,000 in his second term alone).

In sum, Federal Government employment grew under Bush.  Under Obama, non-Defense Federal workers have declined, and overall they have grown only because of additional Defense Department civilian workers.  All the numbers are relatively small, in particular relative to the size of the full US labor force.  But the assertion by many Republican politicians that the Federal workforce has exploded under Obama is false.

Contracting Government Has Hurt Job Growth

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(change, in thousands of jobs) Jan 2001 to Jan 2005 Jan 2005 to Jan 2009 Jan 2001 to Jan 2009 Jan 2009 to Nov 2011
Total Employment -16 +1,110 +1,094 -1,855
Private Sector -916 +263 -653 -1,262
Government Sector +900 +847 +1,747 -593

Obama has repeatedly and emphatically been charged by Republican politicians as fostering  a huge expansion in government job growth, with this a major cause for the weak recovery in private job growth.  The facts do not support this.  The government sector has in fact been contracting sharply during the Obama period, in distinct contrast to the expansion during the Bush presidency, and it is this contraction which indeed can explain a significant share of the drop in overall jobs in the economy.

The table above, drawn from Bureau of Labor Statistics (US Department of Labor) figures on employment levels by the major sectors, shows the change in the number of those employed, for the periods between January 2001 and January 2005 (the first Bush term), between January 2005 and January 2009 (the second Bush term), between January 2001 and January 2009 (the two Bush terms together), and between January 2009 and November 2011 (the most recent figures, for the Obama term so far).

In the first Bush presidential term, overall job growth was basically zero.  But it is striking that it only comes to zero because a decline of 916,000 private jobs is almost fully offset by a nearly identical rise in government jobs of 900,000.  Note that while the time periods we are examining are the presidential terms, government job growth is largely affected by changes at the state and local level, as these account for about 87% of government jobs.

During the second Bush term, private sector job growth became positive, by a modest 263,000 for the period (with growth early on offset by the downturn in his final year), while government job growth continued at a roughly similar positive rate as during his first term.  With both positive, total job growth was then about 1.1 million.

For the Bush presidency as a whole, it is then interesting to note the overall job growth of about 1.1 million (all in his second term), only came about due to a growth in government jobs of about 1.75 million:  Private jobs in fact fell by about 650,000.

During the Obama presidency so far, government job growth went into reverse, with a decline of almost 600,000 jobs.  It is interesting that the pace of the decline for the first 34 months of Obama’s 48 month term (that is, through November 2011), matches almost exactly the pace of the increase during either of the Bush terms.

Suppose government job growth had increased during the Obama period at the pace it had during the Bush terms.  There would then have been a growth in government employment of over 600,000, rather than a decline of almost that amount, for a swing of 1.2 million jobs.  Assuming the same decline as now of over 1.2 million private jobs, overall jobs would have still fallen, but by only about 600,000 rather than over 1.8 million.

Of course, with such a different policy on government job growth, one would not expect private job growth to be the same.  Conservatives might argue that the government job growth would “crowd out” the private sector, leading to even an even larger fall in private jobs.  But there is no evidence to support this, in an environment where unemployment is high and interest rates on government borrowing are close to zero as the economy suffers from a liquidity trap.

Indeed, the basic insight of John Maynard Keynes is that in such a situation, government job growth (and its accompanying spending) will not only not displace private job growth, but will add to it at a multiple of what is spent directly, as the newly employed by the government will add to demand for privately produced goods and services as they spend their wages.  A reasonable estimate of this government employment multiplier would be at least two, and many would argue higher.  At a multiplier of two (that is, each additional government job leads to one additional private job, for two total), the swing in government employment of 1.2 million (that is, a rise of 600,000 rather than a decline of about 600,000), would have led to 1.2 million additional private jobs, and total employment growth would then have been a positive of 600,000 rather than a negative of over 1.8 million.  This is a swing of 2.4 million jobs.  With current unemployment in the US of 13.3 million, and a civilian labor force of 153.9 million, the unemployment rate would then be 7.1% rather than the current 8.6%.  It was 7.8% when Obama took office.

One can quibble with the specific figures, and what multiplier to assume.  But the basic point is that the contraction in government employment in recent years (primarily at the state and local levels) is a major reason why the overall job picture is still so bad.  If government employment had continued to expand at the pace it had during either of the Bush terms, rather than contract at a similar pace, then under quite plausible estimates, unemployment would be less now than when Obama took office.

Profits Are Up, While Employee Compensation Stagnates

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Aggregate profits in the national economy, while volatile, have grown rapidly over the past decade, while employee compensation has been lackluster.  Profits (defined here as including corporate profits [the largest component], proprietor’s income, rental income, net interest income and business transfers) plus Compensation of Employees (along with a smaller third category, for taxes on production and imports less subsidies, plus the net surplus or deficit on government enterprises such as the Post Office), sum up to National Income.  Note that Compensation of Employees is the total compensation for all workers as a group, and is not per worker.  The Bureau of Economic Analysis of the US Department of Commerce provides estimates as part of the National Income and Product Accounts, and the most recent figures were released on November 22.  The graphs and figures shown here come from analysis of that underlying data.

Profits, Employee Compensation, and overall National Income grew at similar (and slow) rates between 2001 and the third quarter of 2003.  Profits then took off, rising rapidly until mid-2006, after which they pulled back some (but with levels relative to 2001 still well above the levels for Employee Compensation; overall National Income will be in between).  Profits then fell rapidly with the 2008 economic collapse, as did Employee Compensation and hence overall National Income, so that by early 2009 they were each only 8% above (in real terms) their level in early 2001, eight years before.  But from that trough, Profits bounced back rapidly, so that by late 2010 they had surpassed their previous mid-2006 peak, and then continued to grow strongly in 2011.  Total Compensation of Employees, in contrast, has grown only modestly from its 2009 trough.  Overall National Income is now almost back to its previous peak, but Compensation of Employees is well below, while Profits are well above, their previous peaks.

One can also look at the changes over the cycle:  from 2001 to the peak in National Income in the first quarter of 2008, from that peak to the trough in the second quarter of 2009, and then from that trough to now (the third quarter of 2011).  In the table below, “Growth” is the growth of that component of National Income (in real terms) over the full period, while “Change” is the change over the period in the aggregate income of that group, in real (2005) dollars, in billions:

change in National Income Components

2001Q1 to Peak

 Peak to Trough

Trough to 2011Q3
2005 prices, % growth and billions of US$ Growth Change Growth Change Growth Change
Employee Compensation 12.6% $839b -5.5% -$415b 1.4% $98b
Profits 20.2% $562b -11.2% -$377b 21.6% $646b
Taxes + Gov’t Firms 19.7% $148b -4.9% -$44b 4.2% $36b
National Income 15.1% $1,549b -7.1% -$836b 7.1% $780b

The contrast in the truly abysmal growth in total Compensation of Employees in the recovery (of just 1.4% in real terms from the mid-2009 trough to now), with the rapid growth in Profits (of 21.6% in real terms over this same period), is stark.  Put another way, Profits obtained 83% of the growth in National Income from the trough in the second quarter of 2009 to now (83% = $646b/$780b), even though it only accounted for 27% of National Income at the trough (and 31% now).  Obama has been loudly blamed by Republican politicians for hurting business profits.  There is no evidence of that here.  There has been a strong growth in Profits in this recovery.  While the data analyzed here cannot allow us to determine the causes of these trends, they do allow us to see whether Profits are depressed in the economic recovery.  They clearly are not.

Finally, the data can be used to calculate the share of National Income going to Profits.  This is shown below.  The Profits share has grown strongly over the past decade, and while it fell in the economic collapse in the last year of the Bush Presidency, it has now bounced back to above its previous peak.