The Great Recession, the worst economic slump in the United States since the Great Depression, has now been a decade in the making. 1 Starting in December 2007, the unemployment rate soared from around 5% to 10% in less than two years. More than 15 million individuals were unemployed in late 2009. According to the Current Population Survey (CPS), total employment fell by 8.6 million people, or about 6%. However, the economy and labor market in the United States began to improve in 2010. The unemployment rate had dropped to 4.1 percent by December 2017. Employment has increased by 16.0 million, to a level that was nearly 5% higher than in November 2007. However, not all labor market indices in the United States had recovered to pre-Great Recession levels. The number of long-term jobless people, particularly those who had been unemployed for a year or longer, remained high. The number of people working part-time unwillingly remained high. Long-term trends, such as the drop in labor force participation, also persisted during the recession and recovery. This article examines how the U.S. labor market has recovered from the Great Recession using CPS data on unemployment, labor underutilization, labor force participation, employment, and earnings.
Unemployment
As a percentage of the labor force, the unemployment rate shows the number of persons who are jobless, looking for work, and available for work (all people who are employed or unemployed). The unemployment rate more than doubled during the 200709 recession3. (See illustration 1.) Since November 2007, the rate has risen by 5.3 percentage points, culminating at 10.0 percent in October 2009, when over 15 million people were unemployed. This was the highest unemployment rate since the aftermath of the 198182 recession, when it exceeded 10% for ten months in a row from September 1982 to June 1983. The rate began to fall in April 2010, with much greater drops beginning in January 2012. Between January 2012 and January 2016, the rate declined by 0.9 percentage point per year, from 8.3 percent to 4.9 percent. After remaining stable for the first three quarters of 2016, the rate began to decline in the fourth quarter of 2016 and continued to do so for the rest of the year. The unemployment rate had declined to 4.1 percent by December 2017, the lowest level since December 2000.
Why did the 2008 recession result in job losses?
Readers’ Question: Does unemployment create recession or does recession induce unemployment?
In essence, it is a recession that creates joblessness. Firms cut back on employing new labor when output and demand plummet. As a result, there are fewer job openings, which leads to an increase in unemployment.
Furthermore, some businesses may be forced to make redundancies, resulting in direct job losses.
As unemployment climbs, the recession may deepen. Unemployed people will have less money to spend, which will result in decreased consumer spending, lower aggregate demand, and slower GDP. This, in turn, may result in more job losses if businesses are forced to reduce their workforce even further.
A rapid increase in structural unemployment (for example, when a significant industry like coal mining closes) could be a factor in starting a recession (but, this is rare). In most cases, a recession is the cause of a rapid increase in unemployment. The issue is that an increase in unemployment can exacerbate the economic crisis.
I looked into why unemployment hasn’t risen more in this recession a while back.
According to a recent report (BBC link), the recession has had a significant impact on employment creation. According to the Chartered Institute of Personnel and Development (CIPD), the recession resulted in the loss of 1.3 million jobs, which is larger than the official unemployment rate because many of those laid off were able to find new employment.
What factors contributed to the 2008 recession?
According to one school of thought, the Great Recession wreaked such havoc in some parts of the country that local economies permanently contracted and local firms wilted or relocated. As a result, structural unemployment rose: people, particularly the low-skilled, were unable to find work without relocating or entering a different industry, which was sometimes impossible owing to economic, educational, or other restrictions. The housing crisis, which was a direct cause of the Great Recession, aggravated the situation by tying individuals to homes they couldn’t sell without losing money.
In 1930, how many people were unemployed?
Despite President Herbert Hoover’s and other officials’ assurances that the crisis would pass, the situation worsened over the next three years. By 1930, 4 million Americans looking for work had failed to find it; by 1931, the figure had climbed to 6 million.
In the meantime, the country’s industrial output had plummeted by half. Bread lines, soup kitchens, and an increase in the number of homeless persons became increasingly widespread in American cities. Farmers couldn’t afford to harvest their crops, so they had to leave them to rot in the fields while the rest of the world went hungry. Droughts in the Southern Plains killed people, cattle, and crops in 1930, bringing high winds and dust from Texas to Nebraska. The “Dust Bowl” prompted a large-scale movement of individuals from rural areas to urban areas in pursuit of jobs.
What was the highest rate of unemployment during the Great Depression?
During the Great Depression, unemployment in the United States reached its greatest point of 25%. Approximately a quarter of the country’s workforce was unemployed. This translates to 15 million unemployed Americans in the United States.
In the 1800s, what was the unemployment rate?
This golden age was brutally ended by the financial panic of 1873. Thousands of firms failed during the next few years, and the term “unemployed” took on a new meaning. In December, the number of unemployed people fell by 556,000 to 14.5 million, and the unemployment rate fell to 9.4%.
What was the solution to the Great Depression?
What was the final straw that brought the Great Depression to an end? That is possibly the most important question in economic history. If we can answer that, we will have a greater understanding of what causes and cures economic stagnation.
The Great Depression was the country’s worst economic downturn. Unemployment was always in double digits from 1931 until 1940. More over one in five Americans could not find job in April 1939, nearly ten years after the crisis began.
On the surface, World War II appears to bring the Great Depression to an end. More over 12 million Americans served in the military during the war, with a similar number working in defense-related jobs. Those war jobs appeared to have provided employment for the 17 million unemployed in 1939. As a result, most historians credit tremendous military spending as the catalyst for the Great Depression’s end.
Some economists, particularly Robert Higgs, have sensibly questioned this conclusion. Let’s be honest. The significance of world peace is called into question if the solution for economic recovery is to put tens of millions of people in defense plants or military marches, then have them build or drop bombs on our enemies overseas. Building tanks and feeding soldiers, while critical to win the war, became a crippling financial burden. We simply exchanged debt for joblessness. The national debt increased from $49 billion in 1941 to about $260 billion in 1945 as a result of the costs of World War II. To put it another way, the conflict had just postponed the problem of recovery.
Even President Roosevelt and his New Dealers saw that spending on the war was not the best option; they feared that after Hitler and Hirohito surrendered, the Great Depression would return, with higher unemployment than ever. FDR’s staff, on the other hand, was adamant about federal expenditure, which, as I explain in New Deal or Raw Deal?, had exacerbated the roots of the Great Depression in the 1930s.
Because winning the war came first, FDR had paused many of his New Deal projects during the war, allowing Congress to abolish the WPA, the CCC, the NYA, and others. When it became clear that the Allies would win in 1944, he and his New Dealers promised a second bill of rights to prepare the country for his New Deal resurrection. The right to “sufficient medical care,” a “good house,” and a “useful and remunerative work” were all included in the President’s bundle of new entitlements. These rights put obligations on other Americans to pay taxes for eyeglasses, “good” houses, and “useful” jobs (unlike free speech and religion), but FDR believed his second charter of rights was a step forward in thinking from what the Founders had envisioned.
Due to Roosevelt’s death in the final year of the war, he was unable to announce his New Deal resurrection. Most of the new measures, however, were supported by President Harry Truman. In the months following the war’s end, Truman delivered big speeches for a full employment bill, which would provide jobs and expenditure if individuals were unable to find work in the private sector. He also advocated a federal housing scheme and a national health-care program.
However, 1946 was not the same as 1933. FDR’s New Deal received substantial Democratic majorities in Congress and widespread public support in 1933, but stagnation and unemployment persisted. Truman, on the other hand, had only a slim Democratic majorityand no majority at all if the more conservative southern Democrats were excluded. Furthermore, the failure of FDR’s New Deal left fewer Americans hoping for a repeat performance.
In sum, Truman’s New Deal resurgence was stymied by Republicans and southern Democrats. They emasculated his bills at times and simply murdered them at others.
During the Great Depression, how many banks failed?
Approximately 9,000 banks failed between 1930 and 1933, with 4,000 of them failing in 1933 alone. Every state’s banks were either temporarily shuttered or operating under limitations by March 4, 1933.
What is the highest unemployment rate ever recorded in the United States?
From 1948 to 2022, the unemployment rate in the United States averaged 5.76 percent, with a high of 14.70 percent in April 2020 and a low of 2.50 percent in May 1953.