Local governments, once a steady source of employment in tough economic times, are shedding jobs in unprecedented numbers, and heavy payroll losses are expected to persist into next year.
The job cuts by city and county governments are helping offset modest private-sector employment gains, restraining broader job growth.
"They'll continue to be a drag on the overall (employment) numbers and the economy," says Wells Fargo economist Mark Vitner.
Localities have chopped 535,000 positions since September 2008 to close massive budget deficits resulting largely from sharp declines in property tax receipts. That exceeds the 413,000 local government jobs cut from 1980 to 1983, the only other substantial downturn in local government employment, according to federal records that go back to 1955.
Christopher Hoene, research director for the National League of Cities, estimates an additional 265,000 or so jobs could be eliminated by the end of 2012.
The cuts so far have mostly come since the recession ended in mid-2009, although they do not yet top those made in manufacturing and construction during and after the recession.
Local government budget woes are continuing even as state layoffs have eased somewhat amid a modest rebound in consumer spending that has lifted state sales tax revenue.
Since January 2010, states have trimmed 51,000 positions, less than 1% of its workforce of 5.1 million, while localities have slashed 406,000 jobs, or nearly 3% of payrolls then totaling 14.5 million.
Cities and counties largely depend on property tax revenue, which has plummeted as home values have continued to decline. Also, the effects of lower property values on taxes are typically delayed, because many jurisdictions do assessments every other year or average appraisals over several years to figure taxes, says Hoene and Kim Rueben, senior fellow at the Urban Institute.
At the same time, states are reducing aid to local governments in an effort to balance their own budgets. The 2009 federal economic stimulus made up some of the gap, but that money ran out this year.
Among localities cutting jobs:
• Chicago Mayor Rahm Emanuel, who unveiled his first budget last week, proposed 517 layoffs and the elimination of 2,000 vacant positions to close a $636 million deficit.
• In New York, Nassau County Executive Edward Mangano is proposing to lay off 700 workers in 2012 after leaving 300 jobs unfilled this year to wipe out a $310 million budget gap. Besides lower sales tax revenue, the county faces rising pension and health care costs mandated by union contracts. "The county executive is committed to not raising property taxes," says spokeswoman Katie Grilli-Robles.
• The city of Venice, Fla., is laying off its fire marshal, deputy fire chief and fire inspector as part of a plan to cut 23 jobs next year, or about 9% of its workforce. The fire chief will conduct inspections, says spokeswoman Pam Johnson.
•The city of San Jose, Calif., which pared 588 jobs in the current fiscal year, will have to ax up to 800 positions next year and shut down all libraries and community center programs unless it caps soaring pension costs, says spokeswoman Michelle McGurk.