cross posted from CEPR Blog
This graphic below traces almost twenty years (January 1995 to February 2014) of gains and losses in US manufacturing, finance, and public employment. Job growth (or loss) is indexed, with three choices for a base point: the start of the series (January 1995), the end of the boom of the late 1990s (January 2000), and the onset of the last recession (December 2007). On each graph, the national numbers are represented by the red line and job trajectories in the states (mouse over the graph, or filter the state list, to identify particular states.
The basic trends are stark and familiar. Manufacturing sheds about 20 percent of its job base during the recession of the early 2000s, and then nearly another 20 percent during the 2007-9 downturn. These losses reflect cyclical shocks, but also the relentless pressure of trade and currency manipulation. Indeed, losses began mounting well before the 2001 recession, when the “high dollar” response to the Asian financial crisis put American manufacturing at a stark and lasting disadvantage.
Financial employment, by contrast, shows fairly steady gains across this era—rising about 20 percent through 2007 before suffering some losses early in the recession. Employment alone understates the rise of finance, which has—over the same span—captured even greater relative shares of value-added and corporate profits. And the larger pattern (finance up, manufacturing down) is hardly accidental: predatory, high-dollar, boom-and-bust finance guts real productive employment by design.
Public sector employment rises slowly and steadily from 1995 to 2007, but then a couple of curious (and debilitating) things happened. First, the impact of recession-era stimulus spending is virtually invisible, as increased federal spending was matched by widespread cuts in state and local spending. After mid-2009, public sector employment leveled off and then began to fall—as state and local losses mounted, and as austerity was generalized by the Budget Control Act of 2011. Since the recovery began (June 2009), the public sector has shed 725,000 jobs—the vast majority (628,000) at the state and local level. This austerity, unprecedented in our recent history, is a drag on recovery and a direct contributor to slow job growth (or continued losses) across the economy.