II. Labor Market Impacts of the Great Recession
The Great Recession has left a vastly changed labor market in its wake, with massive job losses, lingering high unemployment, and a huge increase in the number of people experiencing prolonged spells of unemployment. With the economic recovery looking to be shallow, the pace of the job market rebound is likely to be insufficiently vigorous over the next several years to reemploy the millions of workers who lost jobs in this recession. This cyclical shock comes on top of long‐standing structural changes in the economy, including the relative decline of manufacturing employment and the impact of technology and other factors leading to a bias in favor of workers with relatively high skills.
Among the salient labor market aspects of the Great Recession are:
1. Massive job loss. Over 8.8 million private sector jobs were lost on net from the employment peak in January 2008 to the employment trough in February 2010, representing a loss of 7.6 percent of the 115.6 million private sector jobs in January 2008.
Slow job market recovery, with a lingering high unemployment rate and a slow rebound in the hiring rate. An average of 139,000 private sector jobs per month have been added over the 13 months of rebound through March 2011—compared to an average monthly loss of 353,000 during the 25 prior months. At this pace, it will take over five years to regain the employment peak.
Decline in labor force participation (and together with the unemployment rate, thus a marked decrease in the employment ratio).
Enormous rise in long term unemployment, with more than 6 million people unemployed for more than 26 weeks starting from early 2010. This represents 4 percent of the labor force unemployed for more than half a year—compared to a peak of 2.5 percent of the labor force in long‐term unemployment in 1982 and less than 2 percent in the recessions associated with the 1990‐92 and 2000‐2002 job market slowdowns.