Local and state governments axed more than 200,000 jobs in 2010, according to U.S. Census data released on Tuesday that showed the growing threat of public employee layoffs to the economic recovery.

According to the Census, local and state governments had 203,321 fewer full-time equivalent employees in 2010 than in 2009 and 27,567 fewer part-time employees.

Most local governments cut full-time jobs in 2010, with the biggest decline in Rhode Island, where the workforce shrank 7.7 percent. Those in North Dakota, one of few states to go through the 2007-09 recession unscathed, added jobs in 2010, with its full-time workforce growing 7.5 percent in 2010.

It was the second year local governments lost part-time employees, with cities, counties and authorities in California shedding the most, 47,620.

The job losses have continued this year. John Lonski, chief economist for Moody's Capital Markets Research told Reuters this month that we are looking at the worst contraction of state and local government employment since 1981.

Analysts polled by Reuters expect a report on Friday to show governments dropped another 30,000 jobs in August, marking the ninth consecutive month of contraction.

Public employees outnumber those in manufacturing, health and other areas typically considered engines of the economy. Local government provides the bulk of those jobs. In 2010, local governments had 12.2 million full-time equivalent employees, while state governments had 4.4 million.

The housing bust, financial crisis and recession devastated state and local tax revenues. For more than three years, states, cities and counties have cut spending, hiked taxes, borrowed and turned to the federal government for help in keeping their budgets balanced.

Texas has weathered the economic maelstrom better than many states. Its governor, Rick Perry, is extolling its employment health as he runs for president. In a recent editorial, he touted Texas as home to nearly 40 percent of the net new jobs created in the country since June 2009.

Census data showed Texas also boosted employment. The Lone Star state had the biggest percentage increase in state workers, 5.9 percent, from 2009 to 2010. That represented a gain of 17,800 full-time jobs.

Local governments in Texas also added the most part-time jobs of all cities, counties and towns, 24,731.

Most state governments saw small decreases in full-time or full-time equivalent employment between 2009 and 2010, the Census said.

Rhode Island, Idaho and Connecticut state governments had the largest declines, each losing 5 percent of their workforces.

The tiny state of Rhode Island has endured pension funding problems and other budget headaches. Earlier this month its city of Central Falls filed for bankruptcy. Now the New England state is recovering from Hurricane Irene.

Most state governments increased their part-time workforces, especially Wisconsin, which picked up 5,063 jobs. Florida shed the most part-time positions, 3,555, or 7.5 percent of the jobs.

(Reporting by Lisa Lambert; Editing by Andrew Hay)

Unemployment