State and Local Government Recruitment Improves as Federal Hiring Falls

State and local government employment led all other categories with an increase of 80,000 jobs in June, helping offset a decline of 7,000 federal government jobs—and netting 73,000 jobs for the government sector. Overall, the Department of Labor’s latest nonfarm payroll report revealed that state and local government hiring accounted for more than half of the 147,000 jobs added last month.

State and local government recruitment has continued to improve in general. The MissionSquare Research Institute’s recent report, “2025 State and Local Government Workforce Survey Results,” found that across 19 key occupations, the share of respondents who considered positions “hard to fill” has dropped by at least 10 percentage points since 2022.

Hank Kim, executive director of the National Conference on Public Employee Retirement Systems, relates these trends to what he has seen in the public pension sector.

“In many ways, public pensions, as an agency of a state … or local government … reflect the hiring trends,” says Kim. “Coming out of COVID, there was a lot of concern … about hiring qualified workers. … There [are] still challenges, although the magnitude—the peak —has leveled off a little bit.”

According to MissionSquare, in 2025, fewer state and local governments reported needing to frequently reopen recruitments due to an insufficient number of qualified applicants. Degree requirements continued to drop for at least some positions, particularly among state governments. More than two-thirds of those dropping education requirements reported it led to an increase in the number of applicants, with most indicating it did not impact the quality of applicants.

Kim says that within the last few years, there has been an “easing of the talent crunch” that the public sector experienced coming out of the COVID-19 pandemic. “I think that’s … the silver lining.”

Outreach Efforts

While approximately 40,000 of the jobs added in June came from the education sector, recruiting outreach by K-12 schools is still being pursued only on a limited basis (4%). Campaigns around other types of public service jobs are also limited (10%), even though respondents found service, personal satisfaction and meaningful work to be chief reasons for choosing the public sector, MissionSquare found.

Kim described the bump in education hiring as potentially part of the ongoing so-called silver tsunami: an aging population and aging, retiring teachers.

Governments have had “broad, but not comprehensive” success in hiring new, younger workers, MissionSquare’s report found. Sixty percent of governments reported being very successful or somewhat successful in recruiting a new generation of employees, and 18% are offering internships or apprenticeships to get younger candidates onboard.

Millennial-and-younger employees tend to care more about working in mission-driven organizations, Kim says, “and that fits public pensions to a ‘T.’”

Attracting Federal Talent

MissionSquare’s report also identified the recruitment of former federal employees as an “emerging priority.” Federal workers, it stated, are a “population … that has similar public service motivations to state and local employees and that is currently experiencing significant job insecurity.”

States such as Hawaii, Virginia, New Mexico and New York, as well as several local governments, have ramped up their outreach efforts and, in turn, have seen an uptick in applications from current or former federal workers. Fifty-two percent of federal employees have indicated a strong interest in state or local employment.

MissionSquare found that only 2% of those surveyed reported outreach to federal workers. However, the strategy was much more common among state governments (11%) than local governments (0.3%). The report noted that because the timing of data collection overlapped with the initial wave of federal staffing cuts by Elon Musk’s Department of Government Efficiency Service temporary organization, it is possible that state and local governments will continue ramping up recruitment efforts in the months ahead.

Kim says that due to federal workforce reductions, state and local governments will make new additional hires, so long as they have the budget to do so.

“There is recognition at the state and local level that … those [workers’] functions don’t just disappear into the ether,” Kim says. “We need those services that are being squeezed at the federal level … and government services are sort of like a balloon. When you squeeze one side, it expands another area.”

Benefits as Key Drivers

Employer-provided retirement benefits are a key motivator for those choosing employment in state or local government. Over the past several years, most public sector plan sponsors have indicated that they either have made no changes to the retirement benefits offered to their employees or have adjusted their retirement contribution amounts. According to NCPERS’ “2025 Public Retirement Systems Study,” which drew on data collected in late 2024, very few state and local public retirement systems are considering any changes in the future.

“Coming out of the … economic crater that was the great financial crisis of 2008, … many plans, if not most, undertook actions to make public pensions more sustainable,” Kim says. “Those belt-tightening sustainability changes … have largely done their work over the last 17 years or so … since the end of the [Great Financial Crisis].”

The 100 largest U.S. public pension funds added $98 billion in asset gains during May, the last month for which complete data are available, thanks to a 2.4% investment gain during the month, according to Milliman’s Public Pension Funding Index.

The consulting and actuarial firm found that the gains boosted the estimated funded level for those public funds to 81.1% from 79.6% a month earlier.

Expanding on what he has seen in the public pension industry, Kim says Millennials characteristically care more than previous generations about retiring younger.

“Millennials recognize that pensions are this valuable asset that you can very much largely get only through … government,” Kim says. “Pensions, for many workers … end up being the second[-largest] asset that they own, if not the largest asset that they own.”

Hybrid and flexible scheduling also remained common among state and local governments. Approximately half of all respondents to the MissionSquare report reported policies providing flexible scheduling. When considering all types of flexible work practices, 67% reported a positive impact on productivity, compared to 4% citing an adverse effect.

The MissionSquare report found that while many employers have implemented return-to-office policies, hybrid work and other flexible practices may continue on individual, departmental or government-by-government bases. States such as Ohio and Texas implemented full-time on-site work, while California phased in hybrid work—first requiring two days in-office, then later four.

Remote and flexible work “is a very important benefit that the [state and local] sector[s] still retains … whereas I think many [organizations] have been walking that back—particularly in finance and at the federal government level,” says Kim.

MissionSquare’s survey was conducted from March 4 through April 7 in partnership with the National Association of State Personnel Executives and the Public Sector HR Association. NCPERS’ survey was conducted in partnership with Greenwald Research between September 19 and November 14, 2024.