Government job loss could hurt recovery

How much New York State and local governments trim their payrolls could slow recovery from the recession, federal bankers said Friday.

William Dudley, president of the Federal Reserve Bank of New York, said job gains in the past year have largely been in health care, private schools, tourism, and finance and professional services, such as law and accounting. Government has fired workers, though not as severely as in New Jersey.

Dudley, who also is vice chairman of the interest rate-setting Open Market Committee, predicted government employment at all levels would probably shrink in the future and the magnitude is cause for concern.

"State and local government [employment] will likely be a drag for some time" on overall job growth, he told reporters in Manhattan. "As the recovery takes shape, private services are the most likely source of job growth."

Still, he said Long Island, New York City and the state weathered the recession better than the nation, with each having less severe job losses.

He also forecast continued employment gains in coming months but said "unemployment remains stubbornly high and is likely to remain so for many months to come."

Fed senior economist Jason Bram noted Wall Street remains a key driver of the region's economy, though hiring in business services, health care and the tourism sectors is fueling this recovery. Financial services pulled the region out of downturns in the early 2000s and 1970s, he said.

Asked about the jobs' outlook for Nassau and Suffolk counties, Bram said proximity to New York City was a partial remedy. "It's not a magic bullet for Long Island but it helps," he said.

Job growth on Long Island has lagged the nation and New York City in the past year.

Employment here grew between five-tenths of 1 percent and 1 percent from February 2010 through March. It expanded 1.2 percent nationwide during the same period, and 1 percent or more in the city.

"For Long Island, it's a mixed picture," Bram noted, citing hiring by hospitals and private schools. He said local governments so far had trimmed, not slashed, their payrolls, but could slash given that "there is a lot of fiscal stress on Long Island."

Separately, Dudley, speaking about the national picture, said the Fed was "missing quite badly" so far its goal of fostering full employment.