Economic Indicators | Jobs and Unemployment

Four Years Into the Recovery and We’re Just a Fifth of the Way Out of the Hole Left by the Great Recession

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The June 2013 employment report, released this morning by the Bureau of Labor Statistics, marked four years since the official start of the recovery in June 2009 with stronger job growth than we have been seeing. The economy added 195,000 jobs in June and an upward revision to prior months’ data brought the average monthly job growth of the last three months to 196,000.

The average growth rate for the previous 12 months was 169,000, so the current rate is an improvement. However, the current pace of job growth is still slower than what’s needed for the economy to return to full employment any time soon. At this pace, it will be more than five years until we get back to the prerecession unemployment rate.

The numbers show that we have made surprisingly little progress over the last four years undoing the damage caused by the Great Recession. One of the best measures for assessing that progress is the employment-to-population ratio (EPOP), which is simply the share of the working-age population with a job. The EPOP is currently 58.7 percent, up one-tenth of a percentage point from May but still 4.6 percentage points below the EPOP of 63.3 percent in early 2007. Some of the lack of progress in the EPOP can be explained by demographic trends such as retiring baby boomers and increasing college enrollment of young people. To get a cleaner read of trends in job opportunities we look at the EPOP after removing young people and people near or above retirement age. As the figure below shows, the employment-to-population ratio of “prime-age” workers—workers age 25–54—dropped from over 80 percent in early 2007 to 74.8 percent at the end of 2009, and has since increased to 75.9 percent. In other words, we are four years into the recovery, and we have climbed only about one-fifth of the way out of the hole left by the Great Recession.

No improvement in the number of involuntary part-time workers in a year and a half

The unemployment rate held steady at 7.6 percent in June, but the “underemployment rate”—the U6 measure of labor underutilization—increased a half a percentage point to 14.3 percent. This was due to a 554,000 increase in the number of “marginally attached” workers (jobless workers who want a job and are available to work but have given up actively seeking work) and a 322,000 increase in the number of workers who want full-time jobs but have had to settle for part-time work. The number of such “involuntary” part-time workers now stands at 8.2 million; there has been no improvement in this number in the last year and a half.  Racial and ethnic minorities have been particularly hard-hit by underemployment.

Four years of recovery, during which more than 700,000 public-sector jobs were lost

Once again the public sector shed jobs, 7,000 in June, continuing the trend of unprecedented public-sector job loss in this recovery. Since the recovery officially began four years ago in June 2009, the country has lost 734,000 public-sector jobs—an enormous drag that did not weigh on earlier recoveries.

This EPI analysis compares public-sector job growth in this recovery with earlier recoveries. It shows that at least three million total jobs have been lost in this recovery due to public-sector job cuts and other cuts in government spending, and to the fact that those cuts have had a ripple effect in the private sector.

Manufacturing lost 6,000 jobs in June, its fourth straight month of small declines. Construction added 13,000 jobs in June, similar to its average job growth of 15,300 over the prior year.

Job growth in low-wage sectors was again relatively strong in June, which is typical when the labor market is so weak. Restaurants and bars increased by 51,700 jobs, higher than its average growth of the prior 12 months, 30,300. Retail trade added 37,100 jobs in June, also higher than its average growth of the prior 12 months, 21,700. Employment in the temporary help services industry increased by 9,500 in June, though this is smaller than this sector’s growth of the prior 12 months, 14,900. Health care added 19,800 jobs in June, lower than its average increase of 22,800 over the prior 12 months.

Hours and wages

The length of the average workweek held steady in June at 34.5 hours, still slightly below its prerecession level. The very high unemployment of the last four years has exerted strong downward pressure on wage growth, since the existence of so many unemployed workers relative to job openings, combined with the lack of outside job opportunities for workers with jobs, means employers don’t have to pay substantial wage increases to get and keep the workers they need. Average hourly wages for all private-sector workers increased by 10 cents in June, and 2.2 percent over the last year. This is a somewhat faster rate of growth than workers were seeing last fall, but as this plot shows, it is still substantially lower than the prerecession rate of wage growth.

Labor force participation still near low of the downturn

The labor force participation rate ticked up to 63.5 percent, just two-tenths of a percentage point above its low of the downturn and far below its prerecession rate of 66.0 percent in December 2007. This uptick should not yet be interpreted as an indication that job opportunities have improved enough to start consistently drawing missing workers—whose ranks are estimated at more than 4 million—back into the labor force. It is unlikely that workers who are out of the labor force due to weak job opportunities are going to join or rejoin the labor force in large numbers until job prospects are strong enough that they won’t face months of fruitless job hunting. Currently, the median (or typical) unemployed worker has been actively searching for a job for around four months (16.3 weeks).

Four years in, unemployment remains elevated across the board

The table shows the current unemployment rate and the unemployment rate in 2007, along with the ratio of those two values, for various demographic and occupational groups. There is substantial variation in unemployment rates across groups, but this is always the case (note that it was true in 2007, before the recession began). A key message from this table is that the unemployment rate is between 1.5 and 2.0 times as high now as it was six years ago for all groups. Today’s sustained high unemployment relative to 2007 across all age, education, occupation, gender, and racial and ethnic groups underscores that the jobs crisis stems from a broad-based lack of demand. In particular, unemployment is not high because workers lack adequate education or skills; rather, a lack of demand for goods and services makes it unnecessary for employers to significantly ramp up hiring.

Table Table (continued)

Unemployment rates of various demographic and occupational groups, 2007 and today

2007 June 2013 Ratio
All 4.6 7.6 1.7
Male 4.7 7.8 1.7
Female 4.5 7.3 1.6
White 4.1 6.6 1.6
Black 8.3 13.7 1.7
Hispanic 5.6 9.1 1.6
Age 16–24 10.5 16.3 1.6
Age 25–54 3.7 6.4 1.7
Age 55+ 3.1 5.3 1.7
Workers age 25 and older
Less than high school 7.1 10.7 1.5
High school 4.4 7.6 1.7
Some college 3.6 6.4 1.8
Bachelor’s and advanced degree 2.0 3.9 2.0
Workers under age 25, not enrolled in further schooling
High school degree 12.0 19.7* 1.6
Bachelor’s and advanced degree 5.4 8.2* 1.5
Occupation
Management, professional, and related occupations 2.1 3.9* 1.9
Service occupations 5.9 9.0* 1.5
Sales and office occupations 4.3 7.5* 1.7
Construction and extraction occupations 7.6 13.6* 1.8
Installation, maintenance, and repair occupations 3.4 6.0* 1.8
Production, transportation, and material moving occupations 5.8 9.4* 1.6

* This is a 12-month average (July 2012–June 2013). This is necessary because the monthly values for these series are not seasonally adjusted.

Source: Author’s analysis of the Current Population Survey public data series

— Research assistance provided by Natalie Sabadish, Hilary Wething, and William Kimball

See more work by Heidi Shierholz