A Recovering Economy Won't Include Federal Workers

The federal government is set to lose jobs even while state and local governments thrive.

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The economy may be showing some modest signs of recovery, but there's one group that will be excluded: federal government workers.

Federal government employment is projected to drop by nearly 11 percent, or around 300,000 workers, from 2012 to 2022, according to a new report from the U.S. Conference of Mayors and economic forecasting firm IHS Global Insight. Over that same period, overall employment is projected to grow by 13.1 percent, and state and local government job growth will be at nearly 9 percent, with those governments adding nearly 1.7 million jobs.

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The divergence between the federal government and its state and local counterparts is largely because they have been forced to tighten their belts at different times, says Jim Diffley, chief regional economist with IHS Global Insight.

"It's a reflection of the opposite of what's happened since the recession started," says Diffley. "Federal government employment grew rapidly with the stimulus. Now we're talking about a contraction at the federal level, even if we don't fall off the so-called fiscal cliff," he says, referring to the spending cuts and expiring tax breaks scheduled for the end of the year. Those cuts could put the U.S. into a recession next year, according to estimates by the Congressional Budget Office.

While the government gets ready for future cuts, state and local governments have already dramatically cut their payrolls during the downturn. Since their employment peaked in 2008, state payrolls have fallen off by roughly 167,000, and local governments have cut nearly 550,000 jobs. Now, the outlook is finally growing brighter. As the economy comes back, so will sales, income, and property tax revenues that keep state and local governments running.

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The report scrutinizes employment projections of 15 cities of varying sizes from across the country and finds that growth in state and local government is generally poised to make up for declines in federal government employment. However, in Detroit, the federal government is expected to cut 4,000 jobs by 2022, with state and local adding fewer than 100 jobs. In Oklahoma City, federal cuts, at just over 3,000 jobs, will also negate a majority of the nearly 4,800 jobs that will be added at the state and local levels.

Michael Nutter, the mayor of Philadelphia and president of the U.S. Conference of Mayors, says that even while he's optimistic about future job growth, he recognizes that federal cuts will be painful for some residents of his city and others. He adds that he and some of his fellow mayors are frustrated with how slowly Washington is approaching the very real problem of cutting budgets.

"The federal government is gong through a process that we've all been through a couple of times now. We made these decisions back in 2008, 2009, 2010. We don't print money, we don't pass continuing resolutions, and we can't really kick the can down the road," says Nutter. "We have to balance budgets every year."

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For this reason, Nutter says, the conference is calling on Congress to take a "balanced, bipartisan approach" to cutting deficits and debt. He says he is confident that such an approach can work, because mayors make their most important decisions outside of the confines of political ideology.

"We don't have time to sit around and have debates about whether you're going to pick somebody's trash up," he says. "There's no Republican or Democrat way of doing these things. You either give people a service or you don't."

Fortunately, the coming years won't be full of such tough decisions for mayors, who will be able to help rebuild local government payrolls as local economies recover. Total nonfarm employment is expected to grow by 8.6 percent in the coming five years and by more than 10 percent in some cities, adding nearly 11.5 million total jobs.

Danielle Kurtzleben is a business and economics reporter for U.S. News & World Report. Connect with her on Twitter at @titonka or via E-mail at dkurtzleben@usnews.com.