The Palmetto Insider

The blog of the South Carolina Policy Council

State Hiring Increases While Private Sector Shrinks

with 2 comments

Over on the Policy Council site, we’ve just released a report questioning the notion that a decreasing unemployment rate means the economy is improving.

As indicated in our analysis, there are two factors that can magically make a state’s employment rate improve. (For instance, from a high of 12.5 percent in January 2010 to the current 10.7 percent rate for South Carolina.) These factors are:

1)      A drop-off in the number of people actually seeking employment

2)      A spike in public sector hiring

Both of these factors are what are causing South Carolina’s apparent increase in employment.

Consider the following:

  • From January to June 2010, the state’s labor force shrunk by 24,796 jobs—contracting by 9,618 persons in the last month alone.
  • The number of people actually employed in South Carolina fell by 1,009 from May to June 2010.
  • Private sector employment in South Carolina has declined by 130,100 jobs, or 8.09 percent, since the beginning of the recession.
  • Public sector employment has increased by 24,500 jobs, or 7.19 percent, since the beginning of the recession.
  • If public sector employment were excluded from the state’s labor picture, the unemployment rate would be 28 percent.

As our report illustrates, the private sector is being crowded out by a rapidly expanding public sector.  

What is even more disturbing is that this trend doesn’t just go back to the start of the recession in December 2008, but is symptomatic of most of the decade. The 2000s started off with a promising economic outlook, as the technology boom was in full force. But then the 2001 recession hit after 9/11; and the housing bubble burst in 2008.

All in all, the first decade of the new century didn’t bode well for free enterprise in the Palmetto State:

  • From 2000 to 2010, South Carolina’s private sector lost 4.73 percent of its jobs.
  • Meanwhile, total public sector hiring increased by 10.3 percent.
  • By comparison, state government lost 2.46 percent of its jobs.
  • During the same period, state spending increased by 60 percent ($13.004 billion in FY2000 to $20.994 billion for FY2010).

Moreover, the last five years, in particular, have seen a massive increase in public sector—including state-level—hiring:

  • Total public sector hiring in South Carolina increased by 8.33 percent.
  • State government employment increased by 4.32 percent (94,900 to 99,000) from January 2005 to January 2010.
  • Private sector employment declined by 4.16 percent (1,493,500 to 1,431,400) during the same period: a loss of 62,000 jobs.
  • During the same period, total state spending increased by 23 percent, or $3.876 billion. 

In short, the public sector is not only growing faster than the private sector, the private sector is shrinking in relation to the public sector. In terms of state hiring alone, the ratio of private sector employment to state employment went from 15.74 in January 2005 to 14.46 in January 2010.

  • This represents an 8 percent contraction of the private sector in relation to state government.

Likewise, the overall ratio of private sector employment to public sector employment shrunk from 4.59 in January 2005 to 4.06 in January 2010.

  • This represents a 12 percent contraction of the private sector in relation to the size of government.
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Written by Geoff Pallay

July 21, 2010 at 10:05 am

2 Responses

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  1. […] (recall that federal and local hiring is expanding even faster than state-level employment), the ratio of private sector employment to state employment went from 15.74 in January 2005 to 14.46 in January 2010. In practical terms, instead of having […]

  2. […] 27, 2010 9:42 am As we wrote last week, public sector hiring is hindering a private sector recovery. (See here for our recent analysis of […]


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