Government-Financed Employment and the Real Private Sector in the 50 States

Government-Financed Employment and the Real Private Sector in the 50 States

Keith Hall, Robert Greene | Nov 25, 2013

Federal Contract-Funded Private-Sector Jobs as a Percentage of Total Jobs

In 2012, public-sector employment made up more than 16 percent of the US labor market. Direct government employment fails to capture the full impact of government spending on state labor markets. Using federal contract data obtained from, we estimated the percentage of private sector jobs actually financed by federal contract dollars in each state. The following four maps visualize our findings.

Accompanying each map are rankings for all 50 states in each map category. National averages were calculated by using figures that equal the sum of the corresponding data from all 50 states and the District of Columbia. Real private sector jobs were calculated by subtracting Federal-contract funded private sector jobs from total nonfarm private-sector payroll jobs. Federal contract–funded private-sector jobs are estimated by calculating federal contract spending as a percentage of the sum of federal contract spending and nonfarm private-sector GDP and multiplying that percentage by total nonfarm private-sector payroll jobs. (Note: For Rhode Island and Delaware, “agriculture, forestry, fishing, and hunting” GDP for 2012 was not reported by the Bureau of Economic Analysis. For these states, we treat nonagricultural private sector GDP as equivalent to private sector GDP.)

The impact of federal contract dollars on state labor markets varies widely. We estimate that, in more than half of the states, less than 2 percent of the labor market is employed by jobs funded by federal contract dollars. However, in a few notable instances (Maryland, New Mexico, and Virginia), between 7.7 and 10.7 percent of nonfarm payroll jobs are funded by the federal government through contract dollars given to private sector firms. (See table

Public-Sector and Federal-Contract Jobs as a Percentage of Total Jobs

The combined total of federal contract-funded jobs and public-sector employment serves as a more accurate indicator of each state’s labor market’s reliance on government spending than direct public-sector employment alone. This map combines these figures. In seven states (Alabama, Alaska, Maryland, Mississippi, New Mexico, Virginia, and Wyoming), government-financed jobs account for more than 25 percent of nonfarm payroll jobs. On the other hand, six states (Delaware, Indiana, Nevada, Pennsylvania, Rhode Island, and Wisconsin) have labor markets in which less than 16 percent of nonfarm payroll jobs are directly or indirectly financed by the federal government. (See table)

Real Private-Sector Jobs as a Percentage of Total Jobs

Larger public-sector and federal contract-funded job markets lead to smaller real private-sector labor markets. For the purposes of this analysis, we defined real private-sector jobs as private-sector employment minus our estimate of private-sector jobs financed by the federal government. Real private-sector jobs range from more than 85 percent of a state’s labor market (Rhode Island) to less than 70 percent (New Mexico). (See table)

Percentage of Real Private-Sector Jobs Gained/Lost Between 2007 and 2012

This map compares the size of each state’s real private-sector labor market in 2012 relative to its size in 2007. It uses our methodology to estimate real private-sector jobs and reveals the large variation in real private-sector labor market vitality that exists among states. We find that, of all states, three (Alaska, North Dakota, and Texas) experienced the largest real private-sector market growth between 2007 and 2012. Five states (Alabama, Arizona, Florida, Idaho, and Nevada) experienced the biggest losses in real private-sector jobs between 2007 and 2012. (See table)

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