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Latest Prosperity Watch: Government job losses erase private sector job gains

As the latest issue of Prosperity Watch points out, September’s jobs report from the Division of Employment Security was hardly encouraging.  Although the unemployment rate dropped to 9.6% from 9.7% in August, these minimal gains have yet to reclaim the ground since April, when the jobless rate stood at 9.4%. 

Perhaps the major factor in this disappointing trend is the fact that government job losses almost completely wiped out the anemic employment gains in the private sector, once again reinforcing the point that you can’t reduce unemployment by increasing the number of unemployed people.  See Prosperity Watch for more details.

8 Comments

  1. Frank Burns

    October 24, 2012 at 4:06 pm

    Is Prosperity Watch suggesting that we hire a bunch of bodies for the government just to give them a job, even though we can’t afford to do it? Job growth has been anemic on the private side but that is where the focus needs to be. We should never allow the tail to wag the dog.

  2. david esmay

    October 25, 2012 at 9:04 am

    No, what they are pointing out is that drastically cutting jobs and spending does nothing to alleviate the problems caused by the Bush recession, it only exacerbates them.

  3. Frank Burns

    October 25, 2012 at 10:06 am

    Sorry but that is how the cookie crumbles. If we can do without, we must do without.

  4. Allan Freyer

    October 25, 2012 at 1:30 pm

    Frank, thanks as always for your comments. I think your argument only holds up if you believe that government workers don’t benefit the private sector economy as consumers or providers of public goods that facilitate economic growth. I understand that this is a widely held philosophy among conservatives, but it’s not an idea that holds *any* currency in mainstream economics. And this is mostly because of math–you can’t bring down unemployment by increasing unemployment.

    And as for what the state can and cannot afford, that’s a policy choice, and it appears we made the wrong one last year. The GA chose to cut taxes on high-income earners (just 2% of which are small businesses), corporations, and big law firms instead of funding teachers, fire fighters, cops, and community colleges, all on the assumption that tax cuts would create jobs and stimulate economic growth. So, where are all these new private sector jobs? That’s right, they just got wiped out by more government job losses. Brilliant.

  5. Allan Freyer

    October 25, 2012 at 1:33 pm

    That first paragraph wasn’t as clear as it should be. It should say that govt employees act as *consumers* of private business godos and services, as well as *providers* of public goods.

  6. Frank Burns

    October 25, 2012 at 2:10 pm

    Allan, Your point regarding public workers being consumers is true and yes that benefits the economy while it also can be a drag on the economy by holding taxes at a high level to keep up with costs. We need to increase jobs in the private sector to really grow our economy. Our state is in direct competition with the neighboring states for employers to establish business. If our taxes are too high (they are), what is the motivation to locate a business in NC when they could go to SC? So to keep taxes down, it is imperative that we hold spending down. This I believe is the point that your argument is missing which is our state is in competition for jobs with the other states. High taxes hurts NC for the private sector.

  7. Allan Freyer

    October 25, 2012 at 2:40 pm

    Frank, thanks for your response! I think most economists would agree with you that raising taxes “too much” will create a drag on the state’s economy. The real debate is over what constitutes “too much,” and there’s just no evidence that taxes are so high here in NC that it discourages business investment and job creation. Just because our tax rate is somewhat higher than those in other states, it doesn’t mean that those taxes are having any meaningful impact on firm location, expansion, and job creation within NC. In fact, there’s just no evidence that this relationship exists.

    Most economists have found that taxes only affect firm location decisions marginally–after taking into account infrastructure, workforce, etc. And it is in these other assets that we have traditionally been most competitive. This is why NC is always rated in the top 5 best states to do business by firm location and business monitors like Site Selection, Forbes, and CEO Magazine. NC offers other advantages that are more important to investment decisions than taxes–advantages like infrastructure and workforce training that require public investment by public employees. So cutting government to finance relatively ineffective tax cuts actually undermines these advantages. It’s like trading in your king of spades to get a 3 of clubs–it just doesn’t make sense.

  8. Frank Burns

    October 25, 2012 at 3:14 pm

    Allan, If you want to look at an extreme case of businesses leaving a state due to high taxes and regulations, look at California. I don’t know what the economists would say, but I can look at it with my own eyes and see that they are voting with their feet. But wow, take a look at all that fine infrastructure!

    What makes you think that NC could not suffer the same if we continued on the track that we were on with Perdue, et al?