How Government Is Hurting the Labor Market

Here's how elected officials are behind some of the more depressing spots in the latest job report.

(John Moore/Getty Images)
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By most measures, the latest jobs report was positive. Labor Department figures showed that the employment rate ticked upward in June, employers added 195,000 jobs, and April and May's job counts were also revised upwards.

Still, it's hard for a jobs report to be unequivocally good, especially with a 7.6 percent unemployment rate. There were a few discouraging points from the June jobs report, and Washington arguably helped to worsen those numbers. Below are three problems the latest jobs report revealed, and how the government contributed to those problems.

[READ: Economy Will Face Shortage of 5 Million Workers in 2020]

1. Government employment is still falling.

The federal government lost 7,000 jobs in June, continuing a long-standing pattern of flat-to-negative job growth from the public sector. Government has relatively steadily shed jobs since the end of the recession (excluding an early 2010 spike in census-related hiring), while the private sector has made up lots of ground.

While federal employment has fallen by more than 100,000 since a 2011 peak, state and local government have driven these public-sector job losses. Lower incomes and lower property values meant lower tax revenues for governments both during and after the recession, but spending cuts also contributed as officials at all levels sought to trim outlays wherever they could – often meaning trimming workers.

2. There are lots of unhappy part-timers.

Yes, it means more people are working, but the number of part-timers who would rather have a full work week is sizable and growing.

Nearly 2.7 million Americans report that they work part-time because they can only find part-time work. The number of such workers continues to trend slightly upward. Another 5.2 million say they are part-time for the reason of "slack work or business conditions." Altogether, there were over 8.2 million Americans in June who reported being part-time for economic reasons. That's down significantly from levels seen immediately post-recession but is also a jump of 300,000 from the month before. In the volatile household survey, that could be a statistical blip, or it could also simply reflect that some employers don't anticipate enough demand to justify more full-time workers. However, one policy in particular has been blamed for creating unwilling part-timers.

"The part-time [rise in June] is being attributed by many, and I subscribe to this, to a change in behavior by employers because of the qualifications threshold with regard to the employer mandate of the healthcare legislation," says Patrick O'Keefe, director of economic research at accounting firm CohnReznick.

[ALSO: Employers Added 195,000 Jobs in June]

He's talking about the so-called "employer mandate" included in the Affordable Care Act, which stipulated that firms employing more than 50 full-time workers must provide health insurance or pay a fine starting in 2014. Smaller firms that don't want to provide benefits may be unwilling to hire full-time workers to avoid moving above that threshold.

As the administration announced last week, the employer mandate will instead be enforced starting in 2015. It's unclear yet what effects that may have on the labor market – employers may still try to stay under the threshold, but some of those firms may see a pressing need for more full-time workers by then as well.

3. Workers are really discouraged.

As the below graph shows, the number of discouraged workers – jobless people who want work but have given up looking – has shrunk considerably since the worst days of the jobs crisis. However, last month that number of people ticked upward by nearly 250,000.

As with part-time workers, that could be a statistical anomaly. But O'Keefe provides another explanation: the expiration of long-term jobless benefits. Federal jobless benefits are petering out for many long-term unemployed workers and budget problems have hastened that end for the residents of some states. North Carolina chose to end its long-term benefits program and sequestration caused some states to shorten the length of the program.