For decades, the Buffalo Niagara region has been able to lean on its government workforce as a foundation of its job market.
With taxpayers pushed to the limit on the tax burden they can afford to bear in a stagnating economy, cash-strapped governments are cutting back.
While that's a good thing in the long run because it will help make the Buffalo Niagara region more competitive by helping to reduce its out-sized cost of government, it's going to put a damper on the region's recovery from the recession in the short run.
In other words, the long-overdue realization by state and local governments that there is a limit to what taxpayers can bear is creating some cracks in the bedrock of the local job market.
In the 2000-01 recession, the Buffalo Niagara region kept adding government jobs even as the rest of the job market tanked.
This time, it's different. Government jobs are at a four-year low after dipping slightly last year, and have dropped every month this year on a year-over-year basis. In June, we were down 1,900 government jobs, a 2 percent drop that was exaggerated by last year's flurry of Census hiring.
Still, the downward trend isn't likely to change anytime soon. State government jobs were down by almost 3 percent in June, hitting a five-year low. Local government jobs were up slightly in June because of seasonal hiring, but they also have been trending downward over the last year.
So while our private sector has been showing notable strength this year, generating 9,200 new jobs over the last year, the impact of those gains is being muted because government shed 2,000 jobs over the same period.
It means that, overall, the Buffalo Niagara region enjoyed a respectable 1.3 percent job growth rate in June, better than the state and national averages but hardly robust. Without the drag from government cutbacks, it would have been much better. Private-sector job growth ran at a 2.1 percent pace in June.
Jaison Abel, senior economist at the Federal Reserve Bank of New York in Buffalo, says that's happening across upstate, where job growth this spring, while weak, still was more robust than it was across the nation. "A significant contributor to this is the weakness in the public sector," he says.
Abel's boss, William C. Dudley, the New York Fed's president, sees it, too.
"Our state and local governments [in the New York and New Jersey region] continue to cut jobs more sharply than governments elsewhere," he says. "The weakness of the public sector continues to pose a risk to employment growth throughout our region going forward."
What it means is that government workers now are part of the overall churning that takes place across the region's job market during every recession. Jobs get cut as the economy weakens. Sometimes, those workers get jobs back in the same field. Sometimes, they're forced to find an entirely new career.
In this downturn, Fed economists say about half of the job gains are coming from the rebound of those old jobs, while the other half are coming from workers who are making the shift to entirely new lines of work.
"Old jobs put people back to work easily," because those workers usually don't have to be retrained, says Erica Groshen, another Fed economist. "New jobs help transform the region and make it more competitive" by shifting employment away from declining sectors, such as manufacturing, and putting people to work in more thriving occupations, like education and health services.
For the Buffalo Niagara region's government workers, that's an entirely new experience.