States fail at uniform and effective employment—federal aid and enforcement were necessary to recover from COVID unemployment

Nationwide, the U.S. economy added 4.5 million jobs in 2022, the second-strongest year for job growth in the past 40 years (after 2021), and a testament to the success of pandemic relief and recovery measures. Although the private sector has recovered quickly, public-sector employment—particularly in state and local government—remains weak. With billions of dollars in relief funds for state and local recovery yet to be spent, this is a once-in-a-generation opportunity to reimagine and rebuild the public sector. State and local lawmakers should seize it. The economic recovery since 2020 Private-sector employment has largely returned to pre-pandemic levels across the country, except for the leisure and hospitality sector, which faced large job losses and remains 5.5% below February 2020 employment levels. The professional and business services industry—which includes professions like accounting, research, and legal services—has surpassed pre-pandemic employment in all regions, with exceptional growth in states like New Hampshire (16.9%), Montana (14.0%), North Carolina (12.7%), Colorado (11.5%), and Texas (10.8%). Meanwhile, the public sector has seen much slower progress. State and local government employment is still 2.3% below pre-pandemic levels as state agencies, school districts, and local governments have struggled to fill vacancies—a result of low pay, cuts to benefits, increasing demands, and other factors. More than half of the remaining jobs shortfall is in public education jobs, a long-standing shortage exacerbated by the pandemic. Since February 2020, only four states and D.C. have fully restaffed state and local government jobs—Idaho (+2.1%), D.C. (+1.7%), North Dakota (+0.7%), Oregon (+0.2%), and Maryland (+0.2%). Meanwhile, large public-sector jobs losses have occurred in several states, with New Hampshire (-8.3%), West Virginia (-7.2%), Hawaii (-6.9%), Louisiana (-6.9%), and Ohio (-5.8%) having the largest percentage declines. State and local government employment saw very slow growth in 2022 Over the past year, specifically, state and local government employment has grown modestly but still lags private-sector job growth. Between December 2021 and December 2022, total nonfarm employment grew by 3.0%, driven mainly by employment gains in the leisure and hospitality (6.3%) and education and health (4.0%) industries. However, state and local government employment grew by only 1.6% over that period. Figure A illustrates year-over-year job growth across all 50 states and D.C., with special attention paid to professional and business services, leisure and hospitality, and state and local government. In leisure and hospitality, employment grew by more than 10% in D.C. (14.0%), Texas (11.3%), Hawaii (11.0%), and New Jersey (10.4%), but shrank by 0.5% in Alabama and Rhode Island. The South and West regions experienced the largest employment gains in 2022. Texas (5.0%), Florida (4.8%), Oregon (4.2%), and North Carolina (4.1%) saw the largest increases in total nonfarm employment over the year. In Texas, Florida, and North Carolina, employment growth was highest in leisure and hospitality, while in Oregon, leisure and hospitality growth was second only to construction. Oregon was the lone standout for state and local government employment growth in 2022 (5.3%)—no other state surpassed 4% growth and two states saw declines (Mississippi and Montana).