GOVERNMENT-FINANCED EMPLOYMENT AND THE REAL PRIVATE SECTOR IN THE 50 STATES

BY KEITH HALL AND ROBERT GREENE

November 25, 2013

www.mercatus.org

FEDERAL CONTRACT–FUNDED PRIVATE-SECTOR JOBS AS A PERCENTAGE OF TOTAL JOBS
KEY 11.0% 3.0 2.8 1.4 0.9 1.6 0.8 1.1 2.4 1.5 1.2 1.6 3.6 2.9 7.7 1.0 1.6 5.9 5.3 1.7 1.8 3.4 0.0% 3.7 1.5 5.3 1.4 10.7 1.1 1.1 2.9 1.5 1.2 0.8 3.5 1.4 5.0 1.3 0.7 7.7 5.5%

3.3 1.4 1.9

0.7

3.9

2.1

2.4

4.8

2 GOVERNMENT-FINANCED EMPLOYMENT AND THE REAL PRIVATE SECTOR IN THE 50 STATES

2.5

4.2 1.9 3.9
Produced by Keith Hall and Robert Greene. Sources: Bureau of Economic Analysis; Bureau of Labor Statistics; USAspending.gov (accessed 11/15/2013). Federal contract–funded private-sector jobs are estimated by calculating federal-contract spending as a percentage of the sum of federal-contract spending and nonagricultural private-sector GDP and multiplying that percentage by total nonfarm private-sector payroll jobs.

FEDERAL CONTRACT–FUNDED PRIVATE-SECTOR JOBS AS A PERCENTAGE OF TOTAL JOBS In 2012, public-sector employment made up more than 16 percent of the US labor market. Direct government employment fails to capture the full impact of government spending on state labor markets. Using federal contract data obtained from USAspending.gov, we estimated the percentage of private sector jobs actually financed by federal contract dollars in each state. The following four maps visualize our findings. Accompanying each map are rankings for all 50 states in each map category. National averages were calculated by using figures that equal the sum of the corresponding data from all 50 states and the District of Columbia. Real private sector jobs were calculated by subtracting Federal-contract funded private sector jobs from total nonfarm private-sector payroll jobs. Federal contract– funded private-sector jobs are estimated by calculating federal contract spending as a percentage of the sum of federal contract spending and nonfarm private-sector GDP and multiplying that percentage by total nonfarm private-sector payroll jobs. (Note: For Rhode Island and Delaware, “agriculture, forestry, fishing, and hunting” GDP for 2012 was not reported by the Bureau of Economic Analysis. For these states, we treat nonagricultural private sector GDP as equivalent to private sector GDP.) The impact of federal contract dollars on state labor markets varies widely. We estimate that, in more than half of the states, less than 2 percent of the labor market is employed by jobs funded by federal contract dollars. ­ However, in a few notable instances (Maryland, New Mexico, and Virginia), between 7.7 and 10.7 percent of nonfarm payroll jobs are funded by the federal government through contract dollars given to private sector firms.
24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 Nevada Florida North Dakota Oklahoma Georgia Louisiana West Virginia South Dakota Michigan Kansas Illinois Vermont Ohio Rhode Island Montana New Jersey Wisconsin Indiana North Carolina Iowa Nebraska Arkansas Minnesota New York Wyoming Delaware Oregon 2.1 1.9 1.9 1.8 1.7 1.6 1.6 1.6 1.5 1.5 1.5 1.4 1.4 1.4 1.4 1.3 1.2 1.2 1.1 1.1 1.1 1.0 0.9 0.8 0.8 0.7 0.7

STATE 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Virginia New Mexico Maryland Mississippi Alabama Missouri Connecticut Arizona Alaska Idaho Hawaii Colorado Kentucky Massachusetts South Carolina Washington Maine Pennsylvania Tennessee New Hampshire Texas California Utah

Federal Contract–Funded PrivateSector Jobs as a Percentage of Total Nonfarm Payroll Jobs 10.7 7.7 7.7 5.9 5.3 5.3 5.0 4.8 4.2 3.9 3.9 3.7 3.6 3.5 3.4 3.3 3.0 2.9 2.9 2.8 2.7 2.5 2.4 2.4

NATIONAL AVERAGE

Sources: Bureau of Economic Analysis; Bureau of Labor Statistics; USAspending.gov (accessed 11/15/2013).

MERCATUS CENTER AT GEORGE MASON UNIVERSITY 3

4 GOVERNMENT-FINANCED EMPLOYMENT AND THE REAL PRIVATE SECTOR IN THE 50 STATES

PUBLIC-SECTOR AND FEDERAL-CONTRACT JOBS AS A PERCENTAGE OF TOTAL JOBS The combined total of federal contract-funded jobs and public-sector employment serves as a more accurate indicator of each state’s labor market’s reliance on government spending than direct public-sector employment alone. This map combines these figures. In seven states (Alabama, Alaska, Maryland, Mississippi, New Mexico, Virginia, and Wyoming), government-financed jobs account for more than 25 percent of nonfarm payroll jobs. On the other hand, six states (Delaware, Indiana, Nevada, Pennsylvania, Rhode Island, and Wisconsin) have labor markets in which less than 16 percent of nonfarm payroll jobs are directly or indirectly financed by the federal government.

STATE 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 New Mexico Virginia Alaska Mississippi Maryland Wyoming Alabama Hawaii Oklahoma Idaho Washington Kentucky South Carolina Montana West Virginia Missouri Arizona Colorado Kansas North Dakota South Dakota Utah Maine Louisiana

Public-Sector and Federal-­ Contract Jobs as a Percentage of Total Nonfarm Payroll Jobs 31.9 29.8 29.3 28.2 27.3 26.3 25.3 24.8 23.4 22.7 22.1 22.1 22.0 21.8 21.7 21.7 21.5 20.8 20.6 20.4 20.3 20.3 20.0 19.8

25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50

Connecticut Arkansas Vermont North Carolina Texas Georgia California Nebraska Oregon Tennessee Iowa New York New Hampshire New Jersey Massachusetts Michigan Florida Ohio Minnesota Illinois Indiana Wisconsin Delaware Pennsylvania Nevada Rhode Island

19.6 19.3 19.2 19.2 19.0 19.0 19.0 18.9 18.6 18.5 18.5 18.0 17.4 17.2 17.2 16.8 16.7 16.5 16.0 16.0 16.0 15.9 15.9 15.9 15.5 15.1 14.3

National Average

Sources: Bureau of Economic Analysis; Bureau of Labor Statistics; USAspending.gov (accessed 11/15/2013).

MERCATUS CENTER AT GEORGE MASON UNIVERSITY 5

REAL PRIVATE-SECTOR JOBS AS A PERCENTAGE OF TOTAL JOBS
KEY 86.0% 80.0 82.8 80.8 84.0 79.7 73.6 81.4 79.7 84.0 79.2 79.4 78.3 77.9 81.5 68.1 80.7 80.2 71.8 74.7 81.0 76.6 78.3 84.1 84.0 70.2 81.0 78.0 68.0% 82.0 84.5 83.3 84.1 82.6 83.2 85.7 80.4 82.8 84.1 72.7 76.0%

77.9 78.2 79.6

81.5

77.3

84.9

81.1

78.5

6 GOVERNMENT-FINANCED EMPLOYMENT AND THE REAL PRIVATE SECTOR IN THE 50 STATES

81.0

70.7 83.5 75.3
Produced by Keith Hall and Robert Greene. Sources: Bureau of Economic Analysis; Bureau of Labor Statistics; USAspending.gov (accessed 11/15/2013). Real private-sector jobs were calculated by subtracting federal contract–funded private-sector jobs from total nonfarm private-sector payroll jobs.

REAL PRIVATE-SECTOR JOBS AS A PERCENTAGE OF TOTAL JOBS Larger public-sector and federal contract-funded job markets lead to smaller real private-sector labor markets. For the purposes of this analysis, we defined ­ real private-sector jobs as private-sector employment minus our estimate of private-sector jobs financed by the federal government. Real private-sector jobs range from more than 85 percent of a state’s labor market (Rhode Island) to less than 70 percent (New Mexico).

STATE 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Rhode Island Nevada Pennsylvania Delaware Wisconsin Indiana Illinois Minnesota Ohio Florida Michigan Massachusetts New Jersey New Hampshire New York Iowa Tennessee Oregon Nebraska California Georgia Texas North Carolina Vermont

Real Private-Sector Jobs as a Percentage of Total Nonfarm Payroll Jobs 85.7 84.9 84.5 84.1 84.1 84.1 84.0 84.0 84.0 83.5 83.3 83.2 82.8 82.8 82.6 82.0 81.5 81.5 81.4 81.1 81.0 81.0 81.0 80.8

NATIONAL AVERAGE 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 Arkansas Connecticut Louisiana Maine Utah South Dakota North Dakota Kansas Colorado Arizona Missouri West Virginia Montana South Carolina Kentucky Washington Idaho Oklahoma Hawaii Alabama Wyoming Maryland Mississippi Alaska Virginia New Mexico

80.8 80.7 80.4 80.2 80.0 79.7 79.7 79.6 79.4 79.2 78.5 78.3 78.3 78.2 78.0 77.9 77.9 77.3 76.6 75.3 74.7 73.6 72.7 71.8 70.7 70.2 68.1

Sources: Bureau of Economic Analysis; Bureau of Labor Statistics; USAspending.gov (accessed 11/15/2013).

MERCATUS CENTER AT GEORGE MASON UNIVERSITY 7

PERCENTAGE OF REAL PRIVATE-SECTOR JOBS GAINED/LOST BETWEEN 2007 AND 2012
KEY 25.0% -3.4 -2.2 0.5 -1.5 1.7 -2.7 -5.2 -0.3 -0.7 -3.6 -0.9 -5.8 -2.8 -3.5 -5.8 -3.1 1.5 -5.2 -6.9 -4.1 0.0 -4.5 0.5 -1.9 -4.2 -2.8 -4.8 -5.4 -14.0% -1.0 -1.3 -2.9 1.6 -0.8 -5.4 -4.9 -4.1 -6.0 -3.4 0.0%

-3.8 -1.7 24.6

-6.3

-6.4

-13.1

-5.2

-9.7

8 GOVERNMENT-FINANCED EMPLOYMENT AND THE REAL PRIVATE SECTOR IN THE 50 STATES

5.6

6.7 -8.3 -5.1
Produced by Keith Hall and Robert Greene. Sources: Bureau of Economic Analysis; Bureau of Labor Statistics; USAspending.gov (accessed 11/15/2013). Real private-sector jobs were calculated by subtracting federal contract–funded private-sector jobs from total nonfarm private-sector payroll jobs. Federal contract–funded privatesector jobs were estimated by calculating federal-contract spending as a percentage of the sum of federal–contract spending and nonagricultural private-sector GDP and multipying that percentage by total nonfarm private-sector payroll jobs.

PERCENTAGE OF REAL PRIVATE-SECTOR JOBS GAINED/LOST BETWEEN 2007 AND 2012 This map compares the size of each state’s real privatesector labor market in 2012 relative to its size in 2007. It uses our methodology to estimate real private-sector jobs and reveals the large variation in real privatesector labor market vitality that exists among states. We find that, of all states, three (Alaska, North Dakota, and Texas) experienced the largest real private-sector market growth between 2007 and 2012. Five states (Alabama, Arizona, Florida, Idaho, and Nevada) experienced the biggest losses in real private-sector jobs between 2007 and 2012.
2007 Real PrivateSector Jobs (Thousands) 274.6 221.4 8,339.5 324.6 7,152.9 1,521.5 243.7 596.4 1,231.8 784.1 1,003.1 2,744.1 1,088.4 1,249.5 4,904.4 2,327.2 350.4 2,486.4 535.9 219.1 2,690.5 1,463.8 2,411.2 107,984.4 980.3 494.8 1,937.8 2,292.1 2012 Real PrivateSector Jobs (Thousands) 342.3 236.2 8,810.1 330.0 7,269.1 1,544.8 245.0 599.2 1,231.8 781.6 995.9 2,723.4 1,078.5 1,237.2 4,839.0 2,292.2 344.6 2,439.4 524.3 213.3 2,615.6 1,422.1 2,340.7 111,276.8 949.7 478.1 1,871.3 2,212.7 Percentage of Real Private-Sector Jobs Gained/Lost 24.6 6.7 5.6 1.7 1.6 1.5 0.5 0.5 0.0 -0.3 -0.7 -0.8 -0.9 -1.0 -1.3 -1.5 -1.7 -1.9 -2.2 -2.7 -2.8 -2.8 -2.9 -3.0 -3.1 -3.4 -3.4 -3.5

STATE 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 North Dakota Alaska Texas South Dakota New York Louisiana Vermont West Virginia Oklahoma Nebraska Utah Massachusetts Kansas Iowa Pennsylvania Minnesota Montana Indiana New Hampshire Wyoming Virginia Kentucky Wisconsin National Average Arkansas Maine Maryland Tennessee

MERCATUS CENTER AT GEORGE MASON UNIVERSITY 9

28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50

Colorado Washington Georgia New Jersey Ohio Illinois North Carolina Connecticut Hawaii Michigan Mississippi California Rhode Island South Carolina New Mexico Missouri Delaware Oregon Idaho Alabama Florida Arizona Nevada

1,898.5 2,324.4 3,338.6 3,365.7 4,534.8 5,057.1 3,392.7 1,385.6 480.3 3,536.4 835.6 12,320.0 421.2 1,531.6 581.7 2,220.6 374.5 1,425.0 513.6 1,511.1 6,736.9 2,137.3 1,117.1

1,829.9 2,236.2 3,202.8 3,226.3 4,342.5 4,827.4 3,229.0 1,317.7 455.6 3,353.7 792.3 11,673.6 398.5 1,448.7 547.7 2,090.7 351.9 1,334.7 481.0 1,406.5 6,180.1 1,930.5 970.2

-3.6 -3.8 -4.1 -4.1 -4.2 -4.5 -4.8 -4.9 -5.1 -5.2 -5.2 -5.2 -5.4 -5.4 -5.8 -5.8 -6.0 -6.3 -6.4 -6.9 -8.3 -9.7 -13.1

Sources: Bureau of Economic Analysis; Bureau of Labor Statistics; USAspending.gov (accessed 11/15/2013).

10 GOVERNMENT-FINANCED EMPLOYMENT AND THE REAL PRIVATE SECTOR IN THE 50 STATES

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