Factors leading to relatively strong growth in the econmy in 2015: How important was the increase in government employment?
An article in VOX discussing the causes of the relative strength the US economy in 2015 lists three factors:
1. Declining oil prices (more generally, declining energy prices)
2. Continued low interest rates
3. An increase in government employment (and, more generally, in government spending)
I don't think there's much reason to doubt the first of these. But my own take on the data is that neither the second nor the third factor cited by VOX made any significant contribution to faster growth in 2015, compared to earlier years.
According to BLS data, consumer energy prices fell between the end of 2014 and the end of 2015 as follows:
Fuel oil: down 24%
Electricity: essentially unchanged
Natural gas: down 12%
Gasoline: down 24%
The Producer Price Index for energy prices has this:
Coal: down 4%
Electricity: essentially unchanged
Natural gas: down 10%
Gasoline: down 33%
The Department of Energy data show crude oil prices declining from the end of 2014 to the end of 2015 by about 44%
Clearly, declining energy prices led to increased purchasing power across the economy.
The second--continued low interest rates--is a good description of reality. For example, car loan rates (according to the FRED database maintained by the St. Louis Federal Reserve Bank, were at 4.06% in November 2014 and 4% in 2015. The average rate on a 30-year fixed rate mortgage rose slightly, from 3.87% at the end of 2014 to 4.01% at the end of 2015. Moody's 30-year Aaa rate was 3.79% at the end of 2014 and 3.97% at the end of 2015. But the continuation of low rates does not mean that the economy would necessarily receive any additional stimulus. That is, the incentive to borrow (in the face un unchanged nominal rates and unchanged expected inflation) was essentially unchanged.
Finally, and the reason I began looking at this to begin with, was :
But as this data from the Brookings Institution shows, things started to change in mid-2014. After years of shedding employees, state and local governments started hiring again.
Again, this is true. (The following data were retrieved from the BLS web site.) Total government employment rose by 99,000 between December 2015 and December 2015. Federal government employment rose by 0.6%; state government employment rose by 0.7%, and local government employment rose by 0.3%. Overall, government employment (which is about 2/3 local government employment) rose by 0.4%. But total employment rose by 1.9% (2.65 Million). And the increase in government employment was only 3.7% of the increase in total employment--government employment, in total, is a little over 15% of total employment. Government employment as a % of total employment continued to fall in 2015.
I would, in fact, argue that the rise in government employment, far from being a major factor in causing total employment to rise, was instead a consequence of rising private sector employment.
My own conclusion is that of the three factors cited by VOX, only declining energy prices were a significant contributing factor to reasonably robust growth of the US economy in 2015. Stable interest rates meant that monetary policy did not turn contractionary in 2015. And the quite small increases in government employment point to continued weakess of government as a source of economic growth, not to government as a major factor in economic growth.