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Public Sector Growth - 11/20/14

The public sector is growing again.  In recent years, government employment and output has been in decline, in part because of sagging State and local government tax revenues in much of the country and because of shifts in federal spending.  But during the first three quarters of 2014, the U.S. public sector expanded 1.8 percent after adjusting for inflation. 

While that’s not rapid growth, it represents a milestone nonetheless.  As reported in the New York Times, unless the public sector shrinks significantly during the current quarter, which is highly unlikely, this will be the first year since 2009 that real public sector gross domestic product has expanded.  The 1.8 figure encompasses spending by federal, state and local governments.  Public sector employment is also expanding, but not quickly.  Growth is mainly attributable to local governments rehiring workers that were laid off during the recession.

Federal government employment has actually shrunk by 21,000 or by 0.8 percent over the past year.  Federal government investment in nonmilitary programs, things like highways, fell to a 54-year low during the third quarter at 0.63 percent of GDP.  Military spending, which includes spending on weapons systems and military bases, declined to a 13 year low during the third quarter.

Anirban Basu, Chariman Chief Executive Officer of Sage Policy Group (SPG), is one of the Mid-Atlantic region's leading economic consultants. Prior to founding SPG he was Chairman and CEO of Optimal Solutions Group, a company he co-founded and which continues to operate. Anirban has also served as Director of Applied Economics and Senior Economist for RESI, where he used his extensive knowledge of the Mid-Atlantic region to support numerous clients in their strategic decision-making processes. Clients have included the Maryland Department of Transportation, St. Paul Companies, Baltimore Symphony Orchestra Players Committee and the Martin O'Malley mayoral campaign.