Public Sector Employment Trends In Michigan and the U.S.

Following the publication of our most recent report, Michigan’s Single-State Recession and its Effects on Public Employment, we received an inquiry about Michigan public sector employment trends compared to the trends in other states.  Although there is a brief mention in our report about Michigan’s public sector employment trends relative to the nation, we believe a more thorough look is warranted.

A report from The Nelson A. Rockefeller Institute of Government sheds some light on the question we received, but it did not go into the level of detail requested about Michigan’s experience relative to other states.  The Rockefeller Institute’s report looks at trends in total employment by level of government (state and local) and by broad category (education and non-education) in the wake of the Great Recession. The report also highlighted total public sector employment changes for each state from August 2008 to November 2012 (August 2008 was chosen because it was the peak employment level).  The CRC report focused on changes in public sector employment over a longer period, going back to early 2001.

Over the nearly four and one-half year period examined by the Rockefeller Institute, Michigan had the third largest slide in public sector employment (7.4 percent), behind Nevada (10.1 percent) and Rhode Island (8.3 percent).  In percentage terms, Michigan’s decline was nearly three times as large as the total U.S. public sector employment decline over this period (2.7 percent).  As documented in the CRC report, and confirmed by the Rockefeller Institute, job losses in the local government sector (11.4 percent – second largest decline behind Nevada) fueled the overall public sector decline in Michigan, as was the case for the nation as a whole (3.2 percent).  The local government sector is generally two to three times as large as state government in most states.

Changes in public sector employment by level of government for Michigan and the nation as a whole are shown in the chart below.  The chart displays the total change in monthly employment compared to the December 2007 (official start of the Great Recession) employment level for state and local government.

State and Local Government Employment: MI and U.S.

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Comparing Michigan’s experience with that of the U.S. public sector as a whole yields a few noteworthy observations.  First, for the U.S. public sector, state and local government employment trends behaved remarkably similar throughout the time period.  In the case of Michigan, the trends followed completely opposite paths from the start; state government employment increased while local government decreased. For the U.S., employment levels in both sectors increased following the onset of the Great Recession and peaked in August 2008.  Since that time, both sectors have continuously shed jobs at more or less the same rate, hitting pre-recession levels in mid-2009 and then falling even more through April 2013.  Compared to the start of the Great Recession, state employment across the U.S. is down about 1.9 percent and local employment is down almost 3.0 percent as of April 2013.  In Michigan, state employment is up almost 7.0 percent, but local government employment is down nearly 13.0 percent.

The second observation has to do with the magnitude of the employment changes in Michigan compared to the U.S.  In the case of state government employment, what accounts for Michigan substantial increase?  And, for local government employment, why did Michigan realize such a massive percentage decline vis-à-vis the U.S. as a whole?  Some insights to these questions can be gleaned from disaggregating the data by sector and by broad category, which is done for state government in the chart below.

State Government Education and Non-Education Employment: MI and U.S.

Slide1Non-education state employment in Michigan (about one-third of the total state category) and in the U.S. overall, responded similarly during economic downturn with a few minor exceptions. Although the Michigan pattern was a little more up and down initially, both Michigan and the U.S. trends have shown steady declines in non-education employment since mid-2009.  As of April 2013, both are roughly five percent below their pre-recession levels.

The changes in education employment at the state level differ significantly.  With 15 public universities, and three of them very large institutions, the Michigan higher education segment represents a larger share of total state employment than in the U.S. as a whole.  Michigan’s employment rise in this sub-sector has been meteoric, increasing non-stop since December 2007 and landing at a level 13.5 percent above its pre-recession level.  CRC attributes the increase in higher education employment to ballooning enrollments, increases in part-time workers, and expanding budgets.  For the U.S., state education employment increased initially following the onset of the economic downturn, but unlike Michigan, remained at this level (between two and three percent above the December 2007 level) for the entire period.  Because of its minority role in the U.S. state education sector, the added education jobs were not sufficient to offset the non-education job losses; therefore, overall state government employment in the U.S. declined slightly since December 2007.

A third and final observation relates to the magnitude of Michigan’s local government employment losses and its potential causes.  Michigan’s job losses in this sector have been much more severe (more than a factor of four) compared to the U.S. total during the Great Recession.  As shown in the chart below, the losses have been fueled by the consistent plunge in education jobs (primarily K-12 education).  Education employment for the U.S. declined more than non-education, but the difference between the two sub-sectors was not as significant as the decline in Michigan.  For the U.S., education lost about 3.5 percent of the jobs in existence in December 2007, compared to a loss of about 2.0 percent of the non-education jobs.  Michigan, in stark contrast, shed over 17.8 percent of the jobs in education compared to the December 2007 level.  Non-education local government employment, which is dominated by public safety, is 6.8 percent below the December 2007.  This job loss is nearly three times as large as the loss in the U.S. for this sector.

Local Government Education and Non-Education Employment: MI and U.S.

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There is little doubt that Michigan’s public sector has contracted substantially in the wake of Great Recession. What is striking from analyzing the data is the fact that Michigan’s employment contraction in this sector has well exceeded the contraction experienced in the U.S. overall.   The job losses have been most acute in the local government sector, especially education.  The local government slide, which began in the early 2000s and accelerated through the Great Recession, shows little sign of changing course without policy changes at the state level.  Local governments may begin adding jobs with the gradual improvement in property values in the state (local governments depend largely on property tax); however, given the significant employment losses and the dim prospects for rapid improvement in local government budgets, regaining pre-recession employment levels is unlikely for some time, if ever.

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