Private-Sector Job Gains Seen Offsetting Government Job Cuts

Friday, 29 Mar 2013 11:28 AM

By John Morgan

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The impact of federal spending cutbacks will not be felt in the March jobs report, in part because the cuts are being spread out over time, but also because any decline in government jobs is being offset by gains in private sector employment, MarketWatch predicted.

A MarketWatch poll of economists estimates the United States added nearly 200,000 jobs in March. The government report is due out April 5.

“It’s going to be almost impossible to observe what impact the sequester government spending cuts is having on the labor market. But we expect it will be fairly small,” analysts at Capital Economics wrote in a report obtained by MarketWatch.

Editor's Note:
 
The Truth About the Economy — Government Documents Lead to Eerie Conclusion

In order to meet a requirement for $85 billion in spending reductions by September, many federal agencies may leave open job positions unfilled. Some also plan to require workers to take short furloughs while keeping their jobs.

Moreover, because of “quirks” in the federal budgeting process, the actual amount trimmed from federal spending could be half of the $85 billion target, MarketWatch estimated.

Since April 2008, local, state and federal governments have eliminated 836,000 jobs, while the private sector has added 4.47 million jobs during the same time period, according to the Bureau of Labor Statistics.

States and localities are seeing a significant increase in tax collections and their budgets are much stronger as compared with a few years ago, MarketWatch said.

“State and local governments employ nearly 90% of all public sector workers and the turnaround in their tax revenues suggests they will soon start to boost headcounts,” Capital Economics stated.

Mark Zandi, chief economist at Moody's Analytics, told CNBC he expects a gain of 205,000 jobs and a 7.8 percent unemployment rate from the March jobs report.

“I expect the real test [for the economy] to come in the May, June, July, August period. … I've been surprised at the economy's resilience so far this year, in the face of the tax increase and some spending cuts. I was expecting weakness but it hasn't happened yet," he said.

Zandi said he does expect federal cutbacks to show up in the nation’s jobs numbers at some point in the coming quarter.

Initial jobless claims, an indication of layoffs, increased by 16,000 to a seasonally adjusted 357,000 in the week ended March 23, the Labor Department reported. That was above economists' forecast of 340,000 new claims, according to Dow Jones Business News.

Editor's Note: The Truth About the Economy — Government Documents Lead to Eerie Conclusion

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