Honey, They Shrunk the Private Sector

There’s a reason why Americans who don’t happen to work for the government or directly benefit from its largesse are not sensing an economic recovery. For them, it’s mostly not happening. ADP’s January employment report showing 22,000 private-sector jobs lost, the last available jobs-related information available when this column was written, only confirms that feeling.

A look at what has happened to the nation’s inflation-adjusted gross domestic product (GDP), the value of all goods and services produced in the economy, during the last six quarters is sadly instructive. Comparing the fourth quarter of 2009 with the second quarter of 2008, we see that:

  • Even after six months of “recovery,” the economy as a whole has shrunk by almost 2%.
  • Uncle Sam’s level of annualized consumption and “investment” has grown by 8.5%.
  • Despite the incessant pleadings of poverty by most state and local governments, their consumption and “investment” have hardly changed.
  • What remains, i.e., the private sector, is 3% smaller.

The private-sector shrink is really about one percentage point higher than indicated, because the above data treats General Motors and Chrysler as if the government and a meddling Congress aren’t in control of them. This of course is nonsense.

Meanwhile, the past year and a half has been a great period to be a federal government employee. While the private sector has shed almost 6.4 million jobs on a seasonally adjusted basis during that time, federal non-postal employment has leaped by over 150,000, a stunning increase of over 7.5%. Two-thirds of the increase occurred during the first eleven full months of the Obama administration, even though the severity of the recession was drop-dead obvious well before he took office. Even higher federal employment is on the horizon.

The burgeoning ranks of federal employees are in an enviable situation compared to their private-sector counterparts -- or perhaps I should say, “underlings.” In December, USA Today reported that:

  • The average federal worker’s annual pay is over $71,200, compared to just over $40,300 in the private sector.
  • Almost one in five federal workers makes $100,000 a year or more -- “and that’s before overtime pay and bonuses are counted.” It’s also before considering a far better than average benefits package.
  • In late 2007, “the Transportation Department had only one person earning a salary of $170,000 or more. Eighteen months later, 1,690 employees had salaries above $170,000.”
  • Effective in January, despite a virtually zero-inflation environment and while pay and jobs were still being slashed in the private sector, a typical federal worker saw his or her pay increase by over 3%.

There is little doubt that whether or not the economy ever returns to something resembling normalcy again, the government’s influence on our daily lives, absent a historic pushback, will be demonstrably larger.