Hello, sequestration.

The monthly jobs report is starting to show the effects of the $85 billion in across-the-board budget cuts that the government needs to carry out before the end of the fiscal year in September. That’s not much in a $16 trillion economy, of course. But economists still expect it to slow growth and reduce employment in the coming months and years.

And it is. Federal employment had been on a downward trend since the start of 2011, with the government shedding about 3,000 or 4,000 positions a month through February. Then sequestration hit on March 1. And in the last three months, the federal work force has shrunk by about 45,000 positions, including 14,000 in May alone. In part, that is because federal offices have gone on hiring freezes and taken other steps to wrench down their spending.

Tens of thousands of federal workers are also seeing their hours cut through mandatory furloughs and bans on overtime. But that data is not really showing up in the jobs report, which includes data on hours for private sector employees, but not public sector ones. Still, expect those furloughs to take a significant bite out of income and consumer spending. Come July, for instance, the Pentagon is going to start to furlough 680,000 civilian workers – out of about 800,000 total – for up to 11 days each.

State and local governments have finally stopped shedding workers, offsetting some of the impact from the federal government. For each of the last three months, local governments have added employees, if only a handful of them. State governments seem to have stopped shrinking their payrolls too.

Sequestration is having an impact on private businesses as well, even if it is harder to see given the way the recovery continues to chug along. Millions of their customers have less money to spend. The government is trimming back on contracts awarded to private firms. But just because sequestration’s impact is diffuse and cumulative over time does not mean it is not there.

Article source: http://economix.blogs.nytimes.com/2013/06/07/the-sequester-starts-to-show/?partner=rss&emc=rss