The recession that followed the 2008 financial crisis in the United States officially ended in June 2009 — four years ago. By various measures, the U.S. economy is improving. However, measured by number of jobs, it is still lagging. We wonder: Which of the following statements is true?
A. U.S. unemployment has declined
B. Fewer Americans are in the workforce
C. Millions of American workers get hired each month
D. Millions of Americans leave their jobs each month
A. U.S. unemployment has declined is correct.
The U.S. economy officially entered its most recent recession — usually defined as two consecutive quarters of negative GDP growth — in December 2007. It emerged a year and a half later, in June 2009.
During the so-called Great Recession, the U.S. economy lost 7.5 million jobs and saw its GDP fall by 4.1%.
At the beginning of the recession, the U.S. unemployment rate — one of the most commonly cited barometers of economic health — stood at 5.0%. By the end of the recession it had nearly doubled, to 9.5%. The unemployment rate peaked a few months later, in October 2009, at 10.0%.
Since the U.S. economy began growing again in mid-2009, the unemployment rate has also improved. As of May 2013, it stood at 7.6%. Despite this improvement, it is still closer to its 10% peak than its pre-recession low of 5%.
B. Fewer Americans are in the workforce is correct.
At the end of the so-called Great Recession in June 2009, the U.S. labor force participation rate had fallen only slightly, to 65.7%, from 66.0% in December 2007.
Unlike the unemployment rate, however, the labor force participation rate has not improved since the recession. In fact, it has gotten worse. As of May 2013, it stood at 63.4%, 2.3 percentage points lower than at the end of the recession. The U.S. economy has not had such a low labor participation rate since the late 1970s.
While some of this decrease is due to the retirement of aging Baby Boomers and people who have decided to return to or stay in school, it is also an indication that the economy is not yet strong enough to lure back the more than six million workers who would like to have a job, but are currently sitting on the sidelines.
The unemployment rate is calculated by dividing the number of unemployed by the labor force. A fall in labor force participation can therefore cause the unemployment rate to drop even though the number of jobless remains the same, creating a false sense of economic health.
C. Millions of American workers get hired each month is correct.
Even though the number of U.S. jobs shrank by 7.5 million during the recession, not all employers ceased hiring. Employers constantly replace workers who quit or retire. In some cases, they even expand their payrolls. But overall, the amount of hiring falls drastically during a recession.
During the Great Recession, U.S. firms and government agencies hired 4.39 million workers per month on average. Since then, hiring slowed to an average of 4.15 million workers per month.
Net job growth has averaged just about 108,000 jobs per month since the recession ended. At that rate, it will take nearly two more years to recover all the jobs lost during the recession. Taking population growth into account, the U.S. economy needs to add about 150,000 jobs per month to keep the unemployment rate from rising.
D. Millions of Americans leave their jobs each month is correct.
During the 18 month-long Great Recession, an average of 4.79 million U.S. workers lost their jobs each month. Since then, this number has fallen to 4.04 million per month. The country’s total active labor force consists of 156 million people.
Ordinarily, a falling number of so-called job separations would be a positive development — an indication that fewer workers are losing jobs.
However, in the current economic environment, the low number of separations is an indication that workers are risk-averse. They view the economy as too weak and offering too few opportunities to take a chance on leaving their current job in order to find a better one.
Recession or no recession, the millions of hires and quits produce a large amount of churn in the labor market that the U.S. economy experiences each and every month.