Government Fails To Tackle Unemployment, As Sequestration Looms

The January jobs numbers released earlier on Friday show that while the private sector added 166,000 jobs, the government shed 9,000 positions in January.

Those job losses have ripple effects throughout the economy, economist Dean Baker explained. "If these people were still getting paychecks, they would have spent them, and that would have employed people elsewhere in the economy," the co-director of the Center for Economic and Policy Research told The Huffington Post. He estimated that government job cuts have cost the economy more than 1 million jobs total.

The unemployment rate rose to 7.9 percent in January, the Bureau of Labor Statistics reported Friday, not much lower than a year ago. In contrast, the unemployment rate averaged 4.6 percent just before the recession, according to BLS.

The government has cut 719,000 jobs since President Barack Obama took office, according to the Bureau of Labor Statistics. Some economists said this has stymied jobs growth, since the government is a major employer, and its employees' spending provides income to other workers.

"The stimulus was helpful, but it wasn't nearly enough," said Baker, who also blogs for The Huffington Post.

The government now is focused on deficit reduction instead of helping put people back to work, he said. "No one is talking about how we shouldn't be cutting the deficit; we really need more jobs and that means larger deficits. No one prominent in the debate is saying that."

The government reduced the maximum duration of unemployment benefits last year. But instead of boosting hiring, this only led some jobless workers to give up looking for work, according to a statement from Baker. (Receiving unemployment benefits is contingent on searching for a job.) The average duration of unemployment has declined over the past year from 40 weeks to 35 weeks, according to the Bureau of Labor Statistics.

The government is scheduled to soon slash spending even more. The government recently postponed but did not eliminate the sequestration, across-the-board spending cuts scheduled to kick in starting on March 1 after a congressional committee formed in response to the debt ceiling crisis failed in 2011 to agree on a deficit reduction plan.

The Economic Policy Institute, a left-leaning think tank, estimates that sequestration would eliminate 689,000 jobs in 2013 and cut GDP growth by 0.6 percentage points.

Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities and former Obama administration economic adviser, who also blogs for HuffPost, said that letting the sequestration go into effect probably would send the unemployment rate up to 8.2 percent.

"While the government's fiscal policy was adding to growth back in 2009 and 2010, at this point it's subtracting from growth," Bernstein said, pointing to the end of the stimulus and payroll tax cut. "If state and local employment had held up instead of falling so quickly, the unemployment rate would easily be a point lower than it is today [6.9 percent]."