Today the BLS released in its jobs report that the U-3 official unemployment rate fell to 7.5% from 7.6% with 165,000 jobs added. This is despite that government jobs lost 11,000 this month, with an accumulated over 1.1 million public sector job losses since May 2010. While the report can be attributed to improvements in housing prices and seasonal factors, other factors also point to the job recovery being mild at best with a disappointing participation rate (63.3), number of hours worked (decreased by 0.2 hour in April to 34.4 hours including manufacturing, decreasing by 0.1 hour ) and U6 unemployment rate (13.9%) .
States unlike the federal government cannot run deficits, so while many jobs in states were shed over the past few years, 2014 may be the year when budgets can actually be a tailwind to growth. For example California recent tax receipts show a 4 billion dollar surprise surplus and states like New York have been able to keep their budget under control and introduce tax cuts for some businesses and families. The state of Texas forecasts a $8.8 billion surplus over its 2 year cycle as well as 1 billion from Ohio and 1.6 billion from North Dakota. So with improving balance sheets states may actually help the country improve the unemployment rate through fiscal policy rather than just through adding public sector jobs.
Source 1: http://www.bls.gov/news.release/empsit.t17.htm - industry sector and selected industry detail
Source 2: http://www.thedailybeast.com/articles/2013/04/01/the-return-of-state-surpluses-could-point-to-more-growth-to-come.html
Source 3: http://www.latimes.com/news/local/la-me-state-budget-20130503,0,1598116.story
The views expressed are the subjective opinion of the article's author and not of FinancialAdvisory.com
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