State and Local Government Employment - Perhaps No Longer a Drag on Job Growth

The National Association of State Budget Officers reports that, in 2014, states will likely see less revenue volatility but also experience a slower rate of revenue growth.  This outlook means a more stable, if not improving, revenue picture for local governments because of the large role state revenue transfers play in local governments’ budgets. If we add on improving home prices and a Federal Government “Mini-Budget Deal,” we get less uncertainty for the current 2013-2014 revenue projection and 2014-2015 fiscal year outlook for state and local governments.   Amidst the economic recovery, losses in government employment was a driver of anemic job growth.  While state and local governments still face obvious structural budget issues the trend of shrinking government payrolls may be over.  The RBC Capital Markets municipal team writes that the November jobs report “validates the bottoming trend” and that cuts in government payrolls are subsiding.  SNWAM sees this burgeoning trend as one less headwind to consistent US employment and GDP growth in 2014.