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The bloodletting experienced by state governments, whether necessary or not, has never been greater. Sadly, those losses resulted in private sector losses as well:
EPI: Of course, three years into recovery from those recessions (figure A), unemployment was not stuck at levels anywhere near as high as today’s 8.2 percent. But it is important to note that it is the historic length and severity of the Great Recession that explains why the economy is so much worse three years into the current recovery than it was three years into the recoveries of the early 1990s and 2000s, and that there is not something atypically weak about the current recovery relative to those earlier ones.
Yet, as figure B shows, the public sector has seen massive job loss in the current recovery—largely due to budget cuts at the state and local level — which represents a serious drag that was not weighing on earlier recoveries. How many more jobs would we have if the public sector hadn’t been shedding jobs for the last three years? The simplest answer is that the public sector has shed 627,000 jobs since June 2009 … public-sector job cuts also cause job loss in the private sector, for a couple of reasons. First, public-sector workers need to use supplies into their work that are sourced by the private sector. Firefighters need trucks and hoses, police officers need cars and radios, and teachers need books and desks. When public-sector jobs are lost, it stands to reason that the supplies into these jobs will fall as well, and indeed research shows that for every public-sector job lost, roughly 0.43 supplier jobs are lost.
Second, the economic “multiplier” of state and local spending is large – around 1.24. This means that the public sector being down 1.1 million jobs has likely cost the private sector 751,000 jobs.