State Problems Risk Renewed Rise In Unemployment

Economists believe that the US recovery is well enough underway so that the private sector will begin to add jobs. It happened to a limited extent in the fourth quarter of last year. Some experts believe that American businesses will add an average of 200,000 jobs in 2011. A new problem that could offset private sector gains is emerging more rapidly than expected.

New York State is likely to layoff 10,000 public service workers as part of Gov. Andrew Cuomo’s plan to cut the New York’s deficit. The state’s budget problems may be worse than many others. But, there are a dozen or so states which are just as bad off as New York . California certainly sits in that group as does Illinois and Michigan. Among them, they could fire tens of thousands of people. Those figures do not include municipal or federal workers.

Camden, New Jersey has a very high crime rate and is deeply in debt. The city laid off 163 policeman this week. That leaves it with 202 officers. If any city needs a large police presence, it is Camden. The firings are hard luck for those who were let go and those they were meant to protect.

Camden is not alone by any means. Cities like Harrisburg, Pa. face default even though they may not be able to legally declare bankruptcy. Flint, Mich. and Pontiac, Mich. have similar problems as do cities across the country. Many have found no way to cope with the fall in property taxes. Illinois recently raised taxes, but that action could be regressive. Total tax revenue may not be helped at all if the levies slow the economy and lead to private sector job cuts.

There is no solid estimate about how many public workers will be laid off. Congress and the Administration have not settled their bitter fights over the American debt ceiling or deficit reduction. Republican leaders recently argued they could take $100 billion out of the federal budget. That will be nearly impossible due to the fixed costs of entitlement programs. It does not mean that an attempt to slash “discretionary” spending  will be avoided. One of the most obvious places to take out federal costs is to reduce staff.

There is a chance that private sector job creation will not reach 200,000 a month this year. There is also a chance that among the federal government, the states, municipalities, and teachers  jobs cuts could reach into the hundreds of thousands. The growing unemployment problem in America is hardly over.

Douglas A. McIntyre