Unemployment Before, During, and After the Great Recession

UnemploymentUnemploymentBefore, During, and After the Great RecessionBefore, During, and After the Great Recession

Dr. Norm Cloutier, DirectorUW-Parkside Center for Economic Education23rd Annual ASET MeetingMilwaukee, WI December 7, 2012

Measuring Measuring Labor Market PerformanceLabor Market Performance

• Household Survey– Current Population Survey of 60,000 hh regarding

labor market behavior in the “reference week.”

• Establishment Survey– Current Employment Statistics (CES) surveys

141,000 businesses and government agencies, 486,000 individual worksites.

Categorizing Categorizing Labor Market BehaviorLabor Market Behavior

• In the Labor Force (civilian, noninstitutionalized, ≥ 16 years-of-age)

– Employed: Worked in reference week.– Unemployed: Did not work in reference week, actively

sought employment in last 4 weeks, and was available to work.

• Not in the Labor Force: Did not work, did not look for work in the reference week, or was unable to work.– Marginally Attached: Want a job, looked in the last 12

months (but not last 4 weeks), are available.• Discouraged Workers: Not looking because of

economic conditions.

Headline Unemployment: U3Headline Unemployment: U3

Oct 2012 7.9%

Oct 200910.1%

Per

cen

tag

e

Labor Force Participation RateLabor Force Participation Rate

Oct 2012 63.6%

Apr 200167.3%

Per

cen

tag

e

The Amazing Disappearing WorkerThe Amazing Disappearing Worker

• Decades-long decline in male 25-54 LFP– 1970: 96.0% 2012: 88.5%

• Aging Boomers: “The Pig in the Python”– We may soon reach 10,000 new retirees per day

• Recession: – Discouraged Workers– Premature retirement

• Public policy: – Relaxed standards for disability

Male and Female Male and Female Labor Force Participation: 1948-2011Labor Force Participation: 1948-2011

Per

cen

tag

e

LFP rate of prime working age LFP rate of prime working age population peaked in 2000population peaked in 2000

Oct 2012 81.5%

% in

th

e la

bo

r fo

rce

LFP Rate of ≥ 65 has been LFP Rate of ≥ 65 has been increasing since 1985increasing since 1985

Oct 2012 18.4%

% in

th

e la

bo

r fo

rce

… … but there are soooo many more of but there are soooo many more of them: the “pig in the python” is agingthem: the “pig in the python” is aging

Past 12 months averaged 6,500 new “seniors” per day

Th

ou

san

ds

Increasing share of working age Increasing share of working age population is disabledpopulation is disabled

Oct 2012 5.4%

Alternative Measures of Alternative Measures of Unemployment: U5 and U6Unemployment: U5 and U6

Oct `129.3%

Oct `1214.6%

Per

cen

tag

e

Causes of Unemployment?Causes of Unemployment?

• Traditional Categories: – Seasonal, Frictional, Structural, Cyclical

• Demand-side:– Insufficient aggregate demand

• “balance sheet” recession• risk averse financial institutions

• Supply-side– Public policy: unemployment insurance, food

stamps, Medicaid, taxes, regulation, – “Uncertainty”

The “Chart of Doom”: The “Chart of Doom”: Job Loss as Percentage of Total Employment PeakJob Loss as Percentage of Total Employment Peak

Job TroughFeb 20108.76 mil jobs lost

Lost > 500,000 jobs/month, Oct `08 – Apr `09

28

― 1981 ― 1990 ― 2001 ― 2007

cum

ula

tive

% c

han

ge

in t

ota

l e

mp

loym

ent

4832

Job Loss as Percentage of Total Job Loss as Percentage of Total Employment PeakEmployment Peak

2007

cum

ula

tive

% c

han

ge

in t

ota

l e

mp

loym

ent

March 2010

Government Jobs Government Jobs During Employment During Employment ContractionContraction

1981

2007

2001

months since employment peak

cum

ula

tive

% c

han

ge

in g

ove

rnm

ent

emp

loym

en

t

1990

Government Jobs Government Jobs During Employment During Employment ExpansionExpansion

cum

ula

tive

% c

han

ge

in g

ove

rnm

ent

emp

loym

en

t si

nc

e tr

ou

gh

1981

1990

2001

2007

Private vs. Government Jobs During Employment Private vs. Government Jobs During Employment Expansion: 2001 vs. 2007 RecessionsExpansion: 2001 vs. 2007 Recessions

cum

ula

tive

% c

han

ge

in

emp

loym

ent

sin

ce

tro

ug

h

2001 Private

2001 Public

2007 Private

2007 Public

Co

ns

truc

tion

4%

Ma

nu

fac

turin

g 9

%

Tra

ns

po

rt & W

are

ho

us

e 3

%

??

? 1

1%

Le

isu

re 1

0%

FIR

E 6

%

W&

R T

rad

e 1

5%

Pro

f & B

us

Se

rv 1

3%

Go

ve

rnm

en

t 16

%

Lo

ca

l Pu

blic

Ed

uc

atio

n 6

%

Job growth by selected industries during Job growth by selected industries during contractioncontraction—expansion phases of the 2007 recession —expansion phases of the 2007 recession

*%= industry’s percentage of overall employment

Since March 2009 initial unemployment claims Since March 2009 initial unemployment claims have been declininghave been declining

… … the average length of unemployment the average length of unemployment seems to have stabilizedseems to have stabilized

Wee

ks

Unemployed ≥ 27 weeks Unemployed ≥ 27 weeks as % of total unemployedas % of total unemployed

Per

cen

tag

e

Improving conditions for job seekers?:Improving conditions for job seekers?:unemployed, job openings, and quitsunemployed, job openings, and quits

2.9*

1.1*

6.7*

1.4*

3.4*

tho

usa

nd

s

Date

*ratio unemployed to openings