As Washington inches closer to massive spending cuts, we should consider the effect that lost government jobs will have on the broader U.S. economy. On Sunday, my colleague Derek Thompson pointed out that government jobs have declined by a larger percentage than private sector jobs since President Obama took office. But within that data you find two very different stories, however: federal government jobs have flourished while state and local government jobs have plummeted.

Here's a chart showing the two contrasting paths (the purple line marks the start of Obama's term):

govt jobs 2011-06.png

Do your best to ignore those big spikes on the red line for federal jobs. These are due to the temporary Census jobs. Their influence is transitory, however, and the end point for the numbers we care about is unaffected by the Census. Also, the vertical axes don't begin at zero so we can better zoom in on the change, not in an effort to mislead readers into thinking that these increases or declines are gigantic -- they aren't. But they are significant.

As you can see, federal government jobs (excluding the postal service) have actually grown fairly aggressively since Obama took office. They're up 139,300 or 6.7%. Over the same period, state and local government jobs are down 556,000 or 2.8%.Though not shown, private sector jobs have declined by 1.8% since January 2009.

We can conclude a few things from this analysis. First, federal government jobs certainly haven't shrunk since Obama took office. In fact, they've grown significantly. For some contrast, from January 2000 through June 2002, during President Bush's first 30 months, federal government payrolls grew by just 1.6% -- a much smaller margin than the 6.7% increase seen during President Obama's tenure.

Second, the 2009 stimulus clearly failed to prevent state and local jobs from being shed. They were growing or static almost precisely until February 2009 -- when the stimulus passed. Then, they began to decline fairly consistently. The bleeding hasn't stopped since.

This analysis foreshadows the potential pain that austerity in Washington could cause in the short-term. If state and local governments had just left their 2008 spending levels intact instead of cutting jobs since 2009, then the U.S. economy would have more than half a million additional employed workers. That certainly wouldn't solve the unemployment problem, but it would help the situation. The unemployment rate would currently be 8.8% instead of 9.2%.

If job cuts at the state and local level continue, then that would be bad enough. But if federal cuts also ramp up, then we'll have an even stronger headwind working against the private sector's job growth. Additional spending cuts should be delayed until the labor market has strengthened and job gains have become more consistent.

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