In a sign of continued financial stress, state and local governments again cut employment in April.
State government has 6.4% less employees than its recent peak in August 2008. That figure does not include the education sector.
Local government employment, except education, is down 4% since its peak in July 2009, according to data from the U.S. Bureau of Labor Statistics processed by RBC Capital Markets LLC. Local education employment is down 3.5% since July 2008.
The local education and state non-education decreases are substantially larger than the comparable peak-to-trough drop in the double-dip recession of the early 1980s, according to RBC head of U.S. municipals strategy Chris Mauro and associate Joshua Acheatel.
“We view these ongoing cuts as a clear signal that state and local governments are still under considerable financial stress,” Mauro and Acheatel wrote in a research note released Friday.
“At this point in the recovery, these entities should be well on their way to restoring employment lost to recession-driven payroll cuts,” they wrote.
In state and local government employment, only the state education sector has seen increased employment since the start of the downturn.
The sector, primarily state colleges and universities, is up 4% since December 2007.
“For the second month in a row, local education accounted for the bulk of the payrolls cuts, declining 10,700 in April after a similar drop of 11,900 in March,” Mauro and Acheatel wrote.
On a seasonally adjusted basis net local and state government employment declined 12,000 in April.
Richard Raphael, head of U.S. public finance at Fitch Ratings, said he was not surprised by the continued state and local government employment cuts.
Local property tax receipts continue to be under pressure, Raphael said, citing both the lag in assessments and continued real estate weakness. Cuts in state aid are also squeezing governments.
The end of federal stimulus aid to the states last summer has hurt these governments, Raphael said.
“The negative trend is not surprising to us, and it reflects the continued fiscal stress for state and local governments,” said Anne Van Praagh, chief credit officer for public finance at Moody’s Investors Service. “State and local governments shed 600,000 jobs from 2008-2011. Last fall Moody’s Analytics also said to expect 50,000 to 75,000 additional cuts.”
