Usually a Job Engine, Localities Slow US Economy

WASHINGTON – In a healthy recovery, states and localities produce jobs, expand social services and help fuel the nation's economic growth.

Republican Governor of New Jersey, Chris Christie, is among the many governors who have continue to say that cutting budgets is the path to job growth. Evidence for this, however, is increasingly scarce. State and local governments cut 30,000 jobs in May, the seventh straight month they've shed workers. Rather than add to U.S. economic growth, they're subtracting from it. (AP Photo)

Then there's the 2011 recovery.

The U.S. economy is moving ahead, however fitfully. Yet state and local governments are still stuck in recession. Short of cash, they cut 30,000 jobs in May, the seventh straight month they've shed workers. Rather than add to U.S. economic growth, they're subtracting from it.

And ordinary Americans are feeling it — from reduced services to fewer teachers, police officers and firefighters.

Few see the pain subsiding soon. Mark Vitner, senior economist at Wells Fargo Securities, expects state and local governments to slash 20,000 to 30,000 jobs a month through the middle of 2012.

Joel Naroff of Naroff Economic Advisors notes that when states cut spending to balance their budgets, as required annually, a ripple effect multiplies the damage: Companies that do business with states and localities suffer. These companies, in turn, scale back their own hiring.

"There's a whole slew of private companies that have to cut back when they don't get the (government) contracts they had been getting," Naroff said. "You can't balance a budget and say everything's going to be beautiful."

Moody's Analytics estimates that each job in state and local government supports an additional 1.3 jobs elsewhere in the economy.

The cutbacks stretch across the country:

• Monticello, Ga., has cut its police force in half — to five. It had planned to eliminate the force entirely until it found the money to keep some officers, says Police Chief Bobby Norris.

• Zanesville, Ohio, just cut nearly 50 jobs from its schools, mostly through layoffs. "People have to realize: There's just so much money," says school Superintendent Terry Martin, who had to close a $7.2 million budget gap through 2016. "We have to watch every dime that we spend."

• In Alameda, Calif., police and firefighters last week couldn't save a drowning man in the ocean because the fire department had cut funding for water rescue training, wet suits and other equipment.

Read more here.



 
 
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