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Welcome to austerity, America!

June 3, 2011: 11:36 AM ET

Those calling for smaller government should be pleased: State and local municipal employees are losing their jobs at a much faster pace than the private sector.

FORTUNE – For all of Washington's bickering over the debt ceiling and all the battle cries for government budget cuts, it's important to point out that there's already a back-door austerity plan well under way and it's showing its very dreary colors in cities and states across America.

Just take a look at today's unemployment figures for May. Job growth slowed sharply, adding only 54,000 nonfarm payroll jobs, compared with 232,000 jobs added in April. What's interesting is that private sector employment has continued to trend up, while governments struggling with severe budget shortfalls have shed workers in corporate cost-cutting fashion.

Employment in local government declined by 28,000 in May over the previous month. Since job growth across governments peaked in 2008, city managers and state governors have shed 446,000 jobs and are expected to cut more in the coming months. All the while, private businesses have been adding headcount, albeit much too slowly to keep up with the growing number of people looking for work. Private-sector employment for May rose by 83,000, although by a much smaller amount than the average 244,000 during the prior three months.

Employment in professional and business services continued to rise in May, adding 44,000 jobs, with noteworthy gains in accounting and bookkeeping services and in computer systems design. The health care industry also added head count by 17,000, although somewhat lower than the 24,000 jobs per month generated during the past 12 months.

And while manufacturing, one of the few bright spots in an otherwise gloomy jobs market, barely added any jobs in May, employment didn't fall nearly as much as seen in state and local governments.

So while Washington goes on to bash governments for spending way too much, the pains of austerity have more than shown themselves. And it's just going to get more painful from here.

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About This Author
Nin-Hai Tseng
Nin-Hai Tseng
Writer, Fortune

Nin-Hai Tseng covers economics and finance. Before joining Fortune, Tseng was a reporter at The Orlando Sentinel and a public affairs associate at GE. She holds an MPA from Columbia University and a BS in Journalism from the University of Florida. She lives in New York City.

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