CHART OF THE DAY: Why The Collapse Of State And Local Employment Is Almost Certainly Over

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If you’ve been following the monthly jobs reports for the past couple of years the pattern has fairly consistent: Private employment growth has been decently robust, while state and local layoffs have dragged headline numbers down.

If headline employment is going to improve, then the bleeding has to stop in the public sector.

And there’s some good reason that this might actually happen.

Check out this chart from Goldman’s Alec Phillips showing the relationship between state and local tax revenue growth and state and local employment growth.

The pattern is crystal clear. Tax revenue growth turns up, and then employment growth turns up a little later.

This pattern is plainly visible going back to 1990.

And now we’re seeing the first signs up an uptick in domestic hiring growth, perfectly ready to play catch up with taxes.

chart, yoy change in state and local payroll vs. tax revenue, jan 18 2012