Friday, September 10, 2010

Update on Government Employment Graphs

by Bill McBride on 9/10/2010 01:25:00 PM

Yesterday I posted a couple of graphs of government payroll employment since 1976 as a response to some comments to Menzie Chinn's post at Econbrowser: The "Ever-Expanding" Government Sector, Illustrated

There were a few questions ... (Please remember I was just answering some question to Menzie's post - not trying to start a huge debate - but I do think data helps to define the issues.)

Q: Does this include active duty military?

A: No. The payroll data is from the BLS and is for civilian employment only.

Q: Does this include government contractors?

A: Government contractors are private employers. The headcount would be included in the BLS report, but not as government employees.

Q: The graphs show that Federal government payroll employment (ex-military) has been declining over the last 35 years - and state and local has been mostly flat. But what about the pay (including benefits)?

A: I don't have that data, but the following graph is based on BEA data and shows the Federal (and defense spending) and state and local spending as a percent of GDP. But this doesn't include any unfunded future liabilities.

Government Spending as Percent of GDP Click on graph for larger image.

There has been a surge in defense spending, but Federal spending ex-defense and state and local spending has been fairly flat (but as I noted above, underfunded future liabilities - like state and local underfunded pension plans - don't show up).

I'm guessing the next question will be how the Federal stimulus spending shows up in the BEA reports. So here is the answer from the BEA:

BEA tracks the portion of federal government sector receipts and expenditures in the national income and product accounts that are affected by the provisions of the ARRA. Many of the ARRA-funded transactions—such as grants, transfers, and tax cuts—are not directly included in gross domestic product (GDP), because GDP only includes government spending on goods and services. However, these transactions affect GDP indirectly by providing resources to households, businesses, and state and local governments to fund personal consumption expenditures, business investment, and state and local government spending.
Now back to the economy.