One way to improve unemployment

I've blogged before about how, not long into Obama's presidency, the private sector began and has continued job growth, but it's the public sector where we've continued to lose jobs. Since then, I've somewhat-planned to try to do some math with the raw data to see how different the unemployment rate would be if we hadn't cut so many government jobs. Luckily, my procrastination paid off and they did this for me on Wonkblog.

Here's the change in public employment in the last 4 recessions:

And here's the numbers of how today's unemployment rate would be different if we had taken a different policy towards government jobs:

Since Obama was elected, the public sector has lost about 600,000 jobs. If you put those jobs back, the unemployment rate would be 7.8 percent. But what if we did more than that? At this point in George W. Bush’s administration, public-sector employment had grown by 3.7 percent... If you add those hypothetical jobs, the unemployment rate falls to 7.3 percent.

But the unemployment rate would actually be lower than those 2 numbers because, at least in the short term, cutting a government job will also hurt the private sector, and adding a government job will help the private sector (unless you're at full employment, which we clearly are not). Because when you fire a bunch of teachers, cops, etc., they have less money to spend. So they buy less things, which means other companies will make less money due to their lost purchases, so then those companies will have to cut jobs. Likewise, if throughout this recession the govt hired more people, more people would have more money to spend, which would allow other companies to hire more employees to cover their new customers. This is what people are talking about when they say WW2 got us out of the Great Depression.

So it seems like the simplest thing we should have done differently to fight this recession is to, at the very least, hold government employment steady. But unfortunately, the 2010 elections brought in a big push toward "smaller government" (i.e. firing many people who currently work for the government). Regardless of what "size" you think the government should be under normal circumstances, it's pretty clear that it's best to have a temporary increase in government jobs during recessions and then trim those back as the economy recovers. Even if we should reduce the number of people the government employs in the long-run, this is a pretty crappy time to do it.