01.10.2013 0

Will state and local governments add 220,000 jobs in 2013?

By Bill Wilson Will state and local governments add 220,000 jobs in 2013? That’s what chief economist at Moody’s Analytics Mark Zandi is suggesting in a recent report by Bloomberg News.

“Their payrolls in the fourth quarter will be 220,000 larger than in the same period for 2012, he projects,” states the report.

There is only one problem. According to data published by the Bureau of Labor Statistics, while state governments added 24,000 jobs from Dec. 2011 through 2012, local government shed 50,000 jobs.

That’s a net loss of 26,000 jobs, casting doubt on the 220,000 jobs that are said will be gained this year.

The report also suggests that expenditures will increase 1.8 percent and revenues by 3.9 percent, according to projections made by Macroeconomic Advisers, the National Governors Association and the National Association of State Budget Officers (NASBO), respectively.

That’s a pretty rosy scenario, all told.

From Fiscal Year 2011 to 2012, spending by states only increased by $2.2 billion, according to data published by NASBO. That’s just a 0.1 percent increase.

Moreover, the $145 billion states got out of the original Obama “stimulus”, and $26.1 billion in Aug. 2010 has run out, reports the Center for Budget and Policy Priorities (CBPP). And states still face a $55 billion budget shortfall for the remainder of the 2013 fiscal year.

That would indicate more cuts still need to be made at the state and local level, not the rapid expansion Zandi promises.

Despite the slight increase in state spending this past year, California for example is still consolidating, with $2.4 billion of cuts in 2012, says NASBO. In 2013, CBPP says it still faces a $15 billion shortfall.

So, where is this magical recovery going to come from?

Bloomberg quotes Jim Diffley, chief U.S. regional economist for IHS Global Insight as suggesting home prices are just now starting to recover. And so in principle this ought to lead to higher revenue. Depressed home values and property tax revenue are largely the reason behind the exceptionally high budget deficits of recent years.

And to be certain, while home prices are up 4 percent in the past year from Oct. 2011 to 2012, they are still about 30 percent below their 2006 highs, according to the Case-Shiller home price index. So, therefore home prices have quite a bit to increase before property tax revenue just gets back to where it was seven years ago.

So, it would appear that Bloomberg and Zandi are relying on highly optimistic revenue projections this year to make their bold predictions. But it may be little more wishful thinking.

At worst, it is blatantly false propaganda, happy talk to make investors feel better about the shoddy economy — when things in reality have shown little improvement. Time will be judge.

Bill Wilson is the President of Americans for Limited Government. You can follow Bill on Twitter at @BillWilsonALG.

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