By now you’ll have already read the news that we had a strong jobs month driven by the hiring of 411,000 census workers plus a not-so-hot addition of 41,000 private sector jobs. Less noted is the fact that the “net gain in government jobs was 390,000,” which is to say we lost 21,000 non-census public sector jobs.
This is one of the least-understood aspects of fiscal policy during the crisis. Once you include state and local government in the calculus, there’s been almost no net stimulus whatsoever. America has a highly decentralized public sector, so accounts of what’s going on that leave out state and local government get very misleading. The proposal that the federal government not do fiscal stimulus during the downturn is, in effect, a proposal for gigantic overall fiscal contraction from the public sector.