Statement from the Volcker Alliance on September Jobs Report
New York, NY – The US Bureau of Labor Statistics reported today that total nonfarm payroll employment rose by 263,000 in September and the unemployment rate fell to 3.5 percent from 3.7 percent in August. State and local government employment was little changed, showing a combined total decrease of 27,000 from August, with the sector’s post-COVID 19 pandemic employment recovery faltering as state revenue growth cools.
“This decrease in state and local employment is an indicator that while the economy is slowing and recession is a distinct possibility, state and local governments may be looking to labor savings as a step to tighten spending should tax collections weaken,” said William Glasgall, Senior Director, Public Finance at the Volcker Alliance.
Governors’ fiscal 2023 budgets estimate that state revenue will rise only 1.4 percent in fiscal 2023 following record growth the year before, according to the National Association of State Budget Officers.
In September, state governments still found themselves below their February 2020 peak employment level of 5.31 million, with a decrease of 16,000 from August’s seasonally adjusted total. In September, local governments were just under 700,000 jobs short of the February 2020 level of 14.7 million, with a decrease of 11,000 from August figures. Today’s report continues the long-term trend of little growth in state and local employment following the 2007-2009 recession.
While states and cities generally have recovered most public worker jobs lost since COVID-19 arrived in 2020, Glasgall said that caution over adding slots remains. An example is New York City, where prior to the COVID-19 pandemic the city expanded the municipal workforce substantially, to more than 325,000. Mayor Eric Adams said on September 6 that through “headcount and attrition management" the city had reduced its employee headcount by 23,000 from the 2019 peak despite unprecedented federal pandemic aid. The Adams Administration subsequently directed city agencies to make 3 percent reductions in city-funded spending – thought not layoffs – in the current fiscal year.
The role that recent federal pandemic-related legislation, such as the Inflation Reduction Act (IRA) will play in terms of state and local aid and revenues is yet to be felt as rulemaking is still underway. The impact of the IRA on states and municipalities will be the focus of the Volcker Alliance’s upcoming monthly Special Briefing webinar on October 20. The webcast is produced in partnership with the University of Pennsylvania Institute for Urban Research and is also available as a podcast on Apple, Google, Spotify, and other platforms.
The Volcker Alliance is continuing to provide research into the long-term impacts of national economic trends on state and local finances, along with its longstanding work empowering and inspiring the next generation of public servants to fill these jobs.
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