Income and Employment: Private vs. Government

Executive Summary

As the U.S. economy further strengthens, we expect personal income to improve and thus continue to support personal consumption. However, the picture differs depending on the different sectors in the economy. In this report, we will concentrate on the differences found between wages, salaries and employment in the private sector and wages, salaries and employment in the government (public) sector. The reason for this segmentation resides in the very different paths these two sectors have taken since the days of the Great Recession. Furthermore, as the rate of unemployment continues to decline, much of the future growth in overall personal income will depend on actual increases in wages and salaries, rather than just getting more people receiving a regular paycheck.

In this respect, wage and salary increases in the private sector have continued, but they are no longer accelerating. However, wages and salaries in the government sector, which includes each level of government (federal, state and local) are still weakening, as sequestration, the freezing of salary increases and negative employment growth continue to affect the public sector.

In the first section of this report, we distinguish between private industry employment and government employment to get a better picture of their actual and relative size in comparative terms. Next, we describe the performance of both sectors with regard to wages and salaries as well as employment over the years. Finally, we conclude with potential implications for growth in personal consumption going forward.