Government Employees: Another Look at Government Debt

In today’s post I want to compare the growth rate in the number of Government employees to the growth rate in the number of Private employees. To that end, I extracted data from the St. Louis Fed FRED system and then indexed that data to visualize the evolution of their growth rates.

You can go here for the graph, or simply look further below. A few observations stand out:

·         From 1960 to 2014 the growth rate of Government employees exceeded the growth rate of employees in the Private market. You can see that by simply observing the “red” line being above the “blue” line.

·         The growth rate of Government employees seems to have peaked around 2008, and has been essentially flat since that time. But in 2015 until the March 2020 lockdowns, the trajectory of the growth turned upward – albeit very slowly.

·         From 2010 until the March 2020 lockdowns, the growth rate of Private employees began to grow at a faster pace than Government employees.

It is worthwhile to note that the underlying dynamics for each dataset are not the same, so we must be careful not to go beyond the obvious. Government employee data is fairly homogeneous, whereas Private employee data is heterogeneous. In other words, the Government data is an agglomeration of one entity (government); whereas, Private data is an agglomeration of multiple entities (many companies). This means that the risk factors that drive one dataset are different than the other.

What does all this tell us?

·         The growth in Private enterprise has kept pace with the Government.

·         The growth in Government represents the “cost of doing business” because the government does not produce anything of value on its own, but rather redistributes wealth.

·         Government is well-entrenched in the economy, which at the moment makes up about 18% of real GDP (as of 4Q2020).

·         It is no coincidence that as Government employees have grown, so has the Federal Debt. This does not bode well as indicator of whether the debt will be paid down. Federal debt will continue to grow.

Government / Private Employee Growth