Firstly, there is a long-line of research that has established public sector job creation has a substantially crowding out effect on private employment. Algan et al (2002) "Public Employment and Labour Market Performance" is representative: 

see here: http://onlinelibrary.wiley.com/doi/10.1111/1468-0327.00083/abstract;jsessionid=3DCE0B532E79755A3E6ECA5CF1A96F11.d03t02Now, perhaps, the crowding out effect isn't as a strong in a job rationing environment, but maybe it is. So, it's perfectly plausible, that the decline in public sector employment has little effect on net employment. I don't know of any study that has look at the crowding out effects of public employment during recessions.

Secondly, we should only particularly care about these job losses if these people were making a positive contribution to social welfare. It's cliche to say that government is wasteful, but it's a true cliche. The public sector is full of people that have negative effects on social welfare. To say 10% of the public sector labor force is worthless wouldn't be outrageous at all (go work at a government agency and you'll realize in 5 minutes at least 10-20% of those employed have no purpose - and it's higher in corrupted local precincts like Detroit). We need more disaggregated data on who exactly is being fire - are they necessary firefighters, teachers, police officers - or are they the the absurd number of various worthless bureacrats like accountants, managers, and administrators that every agency has in excess. What these people were doing matters. Now, I wouldn't be surprised if our incompotent governments kept the most worthless employees and fired the valuable ones (who wants to bet it was the best, young teachers that were fired whereas the incompetent, older ones were kept because of arbitrary union rules)  - but we need to see if this is true first before assuming it is.  

Also, here is a random question, has anybody really noticed a substantial decline in the quality of public services? To me, the quality of public service in this country is just as terrible as ever. The schools are still awful. The police service in major cities are just as ineffective as ever. I haven't noticed big changes in public sector services from the job losses. 

Good, we have too many public employees anyway.

The public sector job loss may be high, but in many cases, it represents a shift over to the private sector, rather than a disappearance of the jobs.  Many governments now view themselves as providing policies and standards, with the actual service delivery being outsourced as much as possible.  It saves money because it eliminates public union representation, but many of those people are still employed, doing the same job with a new employer at lower pay.  I'm not a fan of killing unions myself, but I just wanted to mention that the loss of public sector jobs does not necessarily mean the loss of the services.  Of course, to the extent that public sector job loss is just outsourcing, the private sector job gains are diminished.

Do any of you know any public sector employees?  Like, we're not all sitting at the DMV filing our nails. 

I'm a public sector employee.  One of the things I do is administer medical research grants.  What does that mean?  It means that I make sure researchers follow the rules that the NIH/NSF/corporations/foundations have laid down - only work funded by the grant is paid on the grant, the granting body gets a report every year detailing what's been accomplished, etc.  I also track spending, so that the researcher doesn't run out of money midway through the process.  I manage hiring and pay, particularly student, grad student and postdoc pay - those are the researchers of tomorrow.  I also do a bunch of other stuff.  The - boring, admittedly - skills that I use to do all this accurately are not the same as the skills that a researcher needs to do research.  Around here, we have ample evidence that when we kick all this stuff back to the researchers, not only does it get screwed up but it means that the researchers spend hours every day on admin instead of in the lab.

If you think the private sector can do all its own medical research, you should ask yourself where we got the foundational discoveries about HIV, cancer, and other big diseases.  Public sector research is where we discover how viruses work, for example.  And it's where we develop drugs and treatments that aren't "financially rewarding" for big corporations - but that come in awfully handy when they keep you from dying of a rare disease.  (I have a friend whose medical condition is so rare, in fact, that she periodically gets treated at NIH itself.  Without public sector research, she would have been dead in her twenties.)

You who hate public sector workers might ask if you're just envious.  I get a living wage, for example. Not a lavish wage - I could probably make ~$5000/year more in the private sector.  But it's reliable. I have good insurance instead of the shitty "heath care savings plans" a lot of folks are stuck with, which is worth far more to me than an extra few thousand.  I can be fired or my position eliminated - but they have to show either that my work isn't needed or that I have been persistently incompetent despite being supported in efforts to improve.  And yes, I get a pension.  Our pension fund investors were smart and conservative, so our pension fund is fully funded.  A lot of lies get told about pension funds, usually by the same people who want to get rid of Social Security and leave poor old people to starve.   I get vacation and sick days, too. 

These are things that you should have. They're basic to a healthy, reasonable existence instead of a cringing, fearful one.  Of course, I still have to save money and be prudent and I certainly work sick just like everyone else, but I'm not desperately afraid that I'll get appendicitis and be on the hook for $20,000 in medical bills.

It's astonishing to me that you think I'm the spoiled, privileged one because I make a living wage and have health insurance, while you think that the dumb, unequal tax policies in this country are perfectly fine.  It's spoiled and selfish to want to afford medical care, but it's perfectly awesome to cling to your millions.

Oh, and you know what?  The reason we have a living wage here is because we organized and got a union back in the nineties.  Before that, they were keeping people in "temp worker" status for their whole careers - literally, you could be a temp for twenty years - to save on benefits.  But strangely, after they started giving people benefits and a living wage, the whole place didn't explode or burst into flames, even with state budget cuts.  It....gasp!....proved possible to treat employees acceptably and carry on with the enterprise.