July 09, 2011 -- Government budget shortfalls hurt the nation's employment situation in June as cash-strapped school districts, municipalities, and state and federal governments either laid off workers or didn't fill vacancies.
The nation shed 39,000 government jobs, the U.S. Labor Department reported Friday. Among those losing jobs in June were 2,700 Philadelphia School District teachers, cafeteria workers, nurses, and central office staff.
The nation's private sector added 57,000 jobs, producing a slender 18,000-job margin of employment growth to mark the second anniversary of the official end of the recession.When the recession ended in June 2009, the unemployment rate was 9.5 percent. Last month, it was 9.2 percent, up from 9.1 percent in May.
But government budget cuts affected more than government employees. The ripple effects in government funding also led to layoffs in what had been one of the strongest sectors throughout the recession: the health and education sector, both highly reliant on governments for funding. The education sector includes nonpublic institutions such as colleges and universities, privately run day-care centers, and tech schools.
In Pennsylvania, for example, legislators cut funding to state colleges 20 percent. John Cavanaugh, chancellor of the state system, said layoffs were possible.
"Where the higher-ed sector was pretty strong for decades, there's now a lot of scrambling to stay flat," said Stephen Hicks, president of the Association of Pennsylvania State College and University Faculties.
Since the recession began in December 2007, the health and education sector consistently added jobs. June's situation was flat, with a 17,400-job decline in education jobs offset by a similar increase in health jobs.
The flatness is significant in the Philadelphia region, which has relied on "eds and meds" for economic stability.
"We apparently believe in Washington and in the state capitals that the way to world economic domination is through cutting education spending," said economist Joel Naroff, who works in Bucks County.
"You can hear my cynicism, but it's the reality of budget cuts. There is no such thing as a free budget cut," he said.
Naroff cautioned that one month did not a trend make, but said that it did bear watching.
Jobs were added in manufacturing, mining, retail, wholesale trade, and computer services. Financial services lost 15,000 jobs in insurance, real estate, credit, and banking. Construction also kept falling, down 9,000 jobs.
This year's earlier job growth has slowed. In June, 14.1 million Americans remained without jobs, up from 13.9 million in May.
In October 2009 -- four months after the recession ended -- unemployment peaked at 10.1 percent. By June 2010, it was 9.5 percent. In March, it fell to 8.8 percent, but has climbed since then.
"At the end of 2009, we stopped dropping," said labor economist Heidi Shierholz at the Economic Policy Institute in Washington. "But the thing is, we stayed there.
"The entire improvement in the unemployment rate has been due to would-be workers deciding to sit out the job market altogether," she said.
"Workers with a job are now no more likely to get laid off than they were before the recession began," she said.
From the recession's start in December 2007 until now, seven million jobs have been lost.
Also not created were 4.1 million more jobs -- about 100,000 a month -- needed to keep up with growth in the working-age population. That led to an 11.2 million job shortfall.
To close that gap and keep up with population growth by June 2014 -- five years out from the end of the recession -- the economy would need to generate 400,000 jobs a month for the next 37 months, an unlikely scenario.
"Layoffs are basically down to where they were before the recession," Shierholz said, "but hiring is barely off its trough at the depth of the recession. Hiring is now 25 percent below where it was before the recession."
That's not much comfort to employees at Lockheed Martin Corp. The company said last month that it would cut 2,700 positions by the end of the year, some of them at its facility in Newtown, Bucks County.
When they get their pink slips, workers will face an environment in which the average length of unemployment is increasing, up to 39.9 weeks in June. Nearly 6.3 million jobless have been out of work for more than 27 weeks.
Meanwhile, federal extended unemployment benefits will begin to expire at year's end, leaving the newly laid-off with 26 weeks of benefits.
"The chief problem is a lack of demand," said Mark Price, a labor economist with Keystone Research Center in Harrisburg. Consumers and businesses still don't feel financially confident enough to buy -- whether it's a new car or a new fleet.
The problem feeds on itself, Price said. As long as unemployment remains stalled at about 9 percent, "there are millions of people who don't have jobs, deep benches of people without jobs. Until that gets worked off, demand isn't going to return."
"And if demand is slow," he said, "hiring will also be slow."
Still, there has been some movement.
This year, for the first time since 2008, ArcelorMittal, a $78 billion global steel manufacturer based in Luxembourg, has hired 47 new workers for its Coatesville plant, said plant manager Ed Frey -- five of them in June.