It’s mind-boggling how much of the national economy is held up by state and local governments. From the Federal Reserve Bank of Atlanta:
State and local governments together spend more on directly consumed public goods and services (excluding grants and national defense) than the federal government does, said Tracy Gordon, a fellow at the Brookings Institution. The economic impact of that spending is signiﬁcant—state and local governments account for approximately $1.8 trillion, or about 12 percent of U.S. gross domestic product, she added.
The Fed chart above shows data for the southeast states, but it mirrors national trends. State and local governments are not increasing employment. What is increasing is the amount of employee wages that is going to benefits. The Bureau of Labor Statistics wrote:
Wages and salaries were up 1.0 percent for the 12-month period ending March 2013, the same as the March 2012 change. Prior values for this series, which began in June 1982, ranged from 1.0 percent to 8.5 percent.
Benefit costs increased 3.5 percent in March 2013, up from the March 2012 increase of 2.3 percent.