It's not clear just how many jobs the government has created or saved with a massive stimulus effort. But government itself is now a source of job losses.
Since the end of the last recession in 2001, government has been a major source of job growth. Over the past nine years roughly two million workers have been added to the payrolls of federal, state and local governments.
Now, with the impact of the stimulus fading, and state and local governments coping with huge budget shortfalls, government payrolls are shrinking. After a brief uptick this year from the hiring of temporary Census workers, government payrolls at all levels are down by about 230,000 from a year ago.
The hope is that the government stimulus spending, together with the plunge in interest rates engineered by the Federal Reserve, will give the economy enough of a boost to get private sector employers hiring again. But while the economy is growing slowly, it's not creating jobs fast enough to keep up with population growth. In August, only 67,000 new jobs were added to private payrolls.
"That's is not enough to get the economy really moving and bring down the unemployment rate," said Diane Swonk, chief economist at Mesirow Financial.
Overall, combined federal, state and local payrolls shrank by 121,000; most of the jobs lost were temporary Census workers. State governments cut 14,000 jobs for the month, while local government payrolls were up by 4,000. Since August 2008, state and local governments have eliminated 242,000 jobs.
Federal aid to states has eased some of the pressure, but wide budget gaps will likely force continued layoffs in the months ahead.
Since the financial meltdown in 2008, some 46 states and the District of Columbia have been shrinking payrolls for public services, according to the Center on Budget and Policy Priorities, which tracks state budgets. Service cutbacks include health care (31 states), services to the elderly and disabled (29 states and the District of Columbia), K-12 education (33 states and the District of Columbia) and higher education (43 states), among others.
Due largely to high unemployment and falling home prices, state governments face a combined budget shortfall of some $180 billion, which will force further job cuts, according to CBPP estimates.
Another round of federal aid to the states might help head off some of those job losses. But with Congress facing voters angry about the swollen federal budget deficit, those spending proposals face strong opposition.
That could change after the midterm elections, especially if the unemployment rate remains stubbornly high. Even if Republicans take control of the House and Senate, they'll face pressure for more aid from state governments controlled by both parties.
Some economists think that as the job market begins to show signs of life and discouraged workers come back into the work force, the jobless rate could jump back up above 10 percent.
"That is a very likely prospect," said Mark Zandi, chief economist at Moody's Analytics. "That means that policymakers can't stand still. The Federal Reserve has to do more, and the president does as well.
Speaking to reporters hours after the August jobs numbers were released, President Obama called on Congress to provide additional tax credits to small businesses that create new jobs. But while there are "better days ahead," it will take some time before they return, he said.
"As I've said from start, there's no quick fix to the worst recession we've experienced since Great Depression," Obama said.