Unemployment in the Great Recession Compared to the 1980s

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Bruce Dickerson
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1 Unemployment in the Great Recession Compared to the 1980s Richard A. Hobbie Executive Director National Association of State Workforce Agencies Assisted by Gina Turrini Please direct questions or comments to January 5, 2011

2 By some measures, the recession was less severe than the recession that began in The number of regular state unemployment claims (as a percentage of the workforce) and the unemployment rate, for example, were higher during the recession than during the recession. This was due in part to the lingering effects of the brief recession in the first half of However, the recovery after the recession was faster and stronger than the current recovery has been. This is particularly striking when looking at job losses; jobs were gained rapidly after the end of the recession, but this has not been the case following the recent recession. Although regular state initial unemployment claims as a percentage of the labor force was higher during all of the recession than during the recent recession, the number of continuing regular state claims 1 as a percentage of the workforce is now higher for the recent recession. The number of discouraged workers 2 as a percentage of the workforce was significantly higher for all of the recession than for the current recession, but it also decreased every quarter after that recession ended. In contrast, the number of discouraged workers as a percentage of the workforce has continued to climb since the start of the recent recession, even after the recovery officially began in June When these discouraged workers eventually reenter the workforce, it may cause unemployment to remain high. Record levels of long-term unemployment and rising worker discouragement are the major lingering problems left by the Great Recession, and there is no sign these problems will abate soon. 1 Continuing unemployment insurance claims are those that are continuing from a previous week, and therefore do not include new or initial unemployment claims. 2 Discouraged workers are those who are no longer actively looking for work because they believe there is no job available to them.

3 During the early 1980s, the United States experienced two short recessions according to the National Bureau of Economic Research. The first lasted from January 1980 to July The second lasted from July 1981 to November For the purposes of this comparison, we are looking at the second recession, which was more similar to the Great Recession in severity and length. The recent recession lasted from December 2007 to July INITIAL UNEMPLOYMENT CLAIMS During the recession, the weekly average number of initial unemployment claims was higher than during most of the recent recession, peaking at roughly 661,000 claims versus 643,000. However, there was both a steeper increase and a slower decline in the number of initial unemployment claims during (see Figure 1). Adjusting for growth in the size of the labor force between the two periods (using covered employment as a proxy), the number of initial unemployment claims has been much lower during the recent recession than during comparable months of the recession. However, although the percentage of the labor force filing initial claims reached a higher peak during the recession, it came down quite quickly. During the current recession, in contrast, this measure fell slowly and has remained fairly stagnant for the past few 11 months (see Figure 2). Currently, initial unemployment claims as a percentage of the labor force is still lower than it was for the comparable month during the recession, but the difference is shrinking (see Figure 2).

4 FIGURE 1: Initial Unemployment Claims 4-Week Average (Seasonally Adjusted) 700, ,000 End of the Recession Recession 600, Recession 550, ,000 End of the Recession 450, , , , Months Since the Start of the Recession

5 Percentage of Covered Employment FIGURE 2: 4-Week Average Initial Unemployment Claims as a Percentage of Covered Employment (Seasonally Adjusted) End of the Recession 0.60 End of the Recession Recession Recession Months Since the Start of the Recession

6 CONTINUING UNEMPLOYMENT CLAIMS The average weekly number of continuing unemployment claims began slightly higher in the recession than in the recession (2,883,000 versus 2,735,750), but quickly became much greater during the recession, due in part to the much larger labor force (see Figure 3). As a percentage of the labor force, the average number of continuing claims was much higher during the recession for the first several months. It was not until summer of 2009 (the end of the recent recession) that the average continuing claims as a percentage of the labor force was higher during the recent recession than for the comparable month of the recession (see Figure 4). Following the end of the recession, the number of continuing unemployment claims continued to drop, while for the past several months, weekly continuing claims as a percentage of the workforce has remained relatively constant (see Figure 4).

7 FIGURE 3: Continuing Unemployment Claims 4-Week Average (Seasonally Adjusted) End of the Recession End of the Recession Recession Recession Months Since the Start of the Recession

8 Percentage of Covered Employment FIGURE 4: 4-Week Average Continuing Claims as a Percentage of Covered Employment (Seasonally Adjusted) End of the Recession End of the Recession Recession Recession Months Since the Start of the Recession

9 UNEMPLOYMENT RATE The unemployment rate at the beginning of the recession was more than 2 percentage points higher than at the beginning of the current recession, and remained higher for almost two years (see Figure 5). The unemployment rate peaked at almost 11 percent in , the same month that the recession officially ended. The unemployment rate peaked several months after the official end of the recent recession in June 2009 at 10.1 percent (see Figure 5). During the recession, the unemployment rate came down much more rapidly than it has during the recent recession. As of fall 2009, the unemployment rate for the current recession has remained higher than the unemployment rate for the comparable months of the recession. Worse, while at this point in the recession unemployment was falling rapidly, unemployment has remained relatively stagnant over the past year (see Figure 5).

10 Unemployment Rate FIGURE 5: Unemployment Rate (Seasonally Adjusted) 11.0% End of the Recession 10.0% 9.0% 8.0% End of the Recession 7.0% Recession Recession 6.0% 5.0% 4.0% Months Since the Start of the Recession

11 CHANGES IN NON-FARM EMPLOYMENT Although initially jobs were lost at a faster rate during the recession (controlling for the size of the labor force), this changed around one year into the recessions. Since the 12 th month following the beginning of the recessions, job losses as a percentage of the labor force have been much higher for the current recession than for the recession (see Figure 6). Job losses peaked at roughly the end of the recession. During that month, jobs lost as a percentage of the labor force was significantly higher for the current recession than for the recession (4.10 percent versus 2.44 percent) (see Figure 6). After the recession ended, employment quickly increased. In contrast, after the end of the recession, jobs continued to be lost, and employment has not significantly improved (see Figure 6).

12 Percentage of the Labor Force 4.00 FIGURE 6: Cumulative Changes in Non-Farm Employment as a Percentage of the Labor Force (Seasonally Adjusted) End of the Recession Recession Recession End of the Recession Months Since the Start of the Recession

13 LONG-TERM UNEMPLOYMENT One of the starkest differences between the recession and the recession is the percentage of the unemployed who have been unemployed for 27 weeks or longer. Long-term unemployment has been higher for the recession from the start, and long-term unemployment as a percentage of total unemployment has grown much larger for the recession than for the recession (see Figure 7). After the end of the recession, long-term unemployment continued to increase slowly for another seven months and then began to decrease. In contrast, long-term unemployment increased after the official end of the current recession (July 2009) for another 10 months, and at a faster rate than during the recession (see Figure 7). Although the percent of the unemployed who have been unemployed for 27 weeks or longer has decreased for the past several months, it still remains markedly higher than the comparable period after the recession (see Figure 7).

14 Percentage of the Unemployed FIGURE 7: Percent of the Unemployed Who Have Been Unemployed for 27 Weeks or Longer (Seasonally Adjusted) 50.0% 45.0% 44.3% 40.0% 35.0% 30.0% End of the Recession Recession Recession 25.0% 20.0% 15.0% 17.3% End of the Recession 10.0% Months Since the Start of the Recession

15 DISCOURAGED WORKERS The number of discouraged workers as a percentage of the total labor force was consistently higher during the recession and in the months after than during the recession (see Figure 8). Once the recession ended, discouraged workers as a percentage of the labor force decreased every quarter. Even after the end of the recession, however, discouraged workers as a percentage of the labor force has continued to climb, but the percentage is still much lower than during the recession (see Figure 8).

16 Percentage of the Labor Force FIGURE 8: Discouraged Workers as a Percentage of the Labor Force (Seasonally Adjusted) End of the Recession Recession Recession End of the Recession Quarters Since the Start of the Recession

17 SOURCES FOR DATA Figures 1 4: Initial and continuing claims data, as well as covered employment, can be found at For these graphs, we calculated the four-week moving average using the most updated weekly claims data available. Figure 5: Monthly unemployment rates can be found Figure 6: Information on monthly changes in private nonfarm employment can be found at Information on the size of the labor force (which was used for Figure 6 and Figure 8) can be found Figure 7: Information on the long-term unemployed can be found Figure 8: Information on discouraged workers is only available quarterly for 1980 to This information can be found in Bureau of Labor Statistics new releases ( and For the Great Recession, we used monthly discouraged worker data from and then found the quarterly average to compare with the recession.

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