International Forecaster Weekly

NEW STUDY CHARTS POST-GREAT RECESSION ECONOMY (Lack of) Employment Remains a Major Problem

The nonpartisan Center on Budget and Policy Priorities (CBPP) is out with the “Chart Book: Tracking the Post-Great Recession Economy.”

This ongoing study is a comprehensive, insightful look at how our economy has fared since the financial crisis that began in late 2007.

Guest Writer | February 2, 2022

By Dave Allen for Discount Gold & Silver

The nonpartisan Center on Budget and Policy Priorities (CBPP) is out with the “Chart Book: Tracking the Post-Great Recession Economy.”

This ongoing study is a comprehensive, insightful look at how our economy has fared since the financial crisis that began in late 2007.

The Chart Book’s blunt conclusions are actually an appropriate starting point for this article:

“The American economy was on solid footing in February 2020. It had been growing since mid-2009 and the huge job losses from the 2007-2009 Great Recession had been erased by 2014. 

“The economic expansion continued into 2020, becoming the longest expansion on record before ending abruptly in the COVID-19 pandemic.

“Growth in the long expansion averaged 2.3% per year, below the rate the Congressional Budget Office was projecting just prior to the Great Recession. 

“President Trump made bold claims for how his policies would raise the economy’s sustainable growth rate significantly above the 2.2% growth rate it had achieved prior to his inauguration and produce a significant increase in the typical worker’s earnings. 

“Those claims were much more optimistic than what the [CBO] and most other outside analysts expected and were not borne out.

“While the recovery from the Great Recession appeared to be faltering in 2015, it regained momentum in the second half of 2016 and economic growth trended upward, with GDP 3.2% higher in the 2nd quarter of 2018 than in the same quarter a year earlier. 

“The growth rate trended down thereafter, however, and GDP grew just 2.3% between the 4th quarter of 2018 and the 4th quarter of 2019, which turned out to be the peak of the longest expansion in U.S. history.

“The 2020 recession turned out to be the deepest but shortest of all recessions in the post-World War II years. 

“Substantial fiscal relief and recovery legislation, together with a highly accommodative monetary policy allowed the economy to recover about half of the losses incurred in the recession relatively quickly.

“But subsequent waves of the virus have contributed to an uneven pattern of GDP and employment growth in the post-2020-recession recovery and expansion.”

The study includes data-heavy sections on how the pandemic stopped in its tracks the slow but steady economic expansion that began in 2009; Federal Reserve policies over the same period; and the prospects for future growth.

But this article focuses solely on the CBPP’s major observations and findings on employment and the prospects for future job growth.

EDITOR’S NOTE: In its Chart Book, the CBPP relies on the recession definition of the National Bureau of Economic Research whose Business Cycle Dating Committee announced in June 2020 that the economic expansion following the trough in April 2009 peaked in February 2020. 

In July 2021, it announced that the trough of the ensuing recession was in April 2020. Thus, although the recession was very steep, it was the shortest on record at just two months (we take issue with this assessment, believing that the profound and extended employment decline warrants a continuation of the 2020 recession). 

Job Growth Rose 113 Months before Pandemic Wipeout

The post-Great Recession expansion — as measured by the government anyway — was long (128 months; almost 11 years). 

Through February 2020, total (private and government) payroll employment had risen for 113 straight months (i.e., almost 9 and a half years). 

Private employment had risen for 120 straight months, but total government employment was barely above what it was at the start of the expansion. 

The study notes the huge employment losses in March and April 2020 — with total nonfarm employment falling by a stunning 20.7 million jobs in April — “largely erasing the gains from a decade of job growth.” 

Despite job gains in every month since then — including an increase of 1.1 million jobs in July 2021 — there were still 3.6 million fewer jobs on nonfarm payrolls at the end of last year than there were at the start of the pandemic.

Private employment rose by 211,000 jobs in December but remains 2.6 million jobs below its February 2020 level. 

Federal government employment decreased by 2,000; state employment remained the same (with losses since February 2020 at 271,000); and local employment declined by 10,000 (putting losses since February 2020 at 673,000).

Congress and the White House enacted relief measures at the end of December 2020 and the American Rescue Plan in March 2021, which the study says helped to jump-start job gains from January through November.

Nonfarm payroll employment was 10.2% (14.1 million jobs) higher in February 2020 than at the start of the Great Recession. 

But because of the job losses since then, in December 2021, NFP employment was just 7.6% (10.6 million jobs) higher than at the start of the Great Recession.

The rise in payroll employment over its peak in the expansion preceding the Great Recession was almost entirely thanks to private-sector job gains. 

Government employment was 459,000 jobs (2.1%) higher in February 2020 than in December 2007, accounting for only 3.2% of the total job gains.

In contrast, government employment in the three expansions preceding the Great Recession accounted for 13% (1982-1990), 10% (1991-2001), and 25% (2001-2007) of each expansion’s employment gains over the level of employment at the peak of the previous expansion. 

In each case, state and local government job growth was the major contributor.

U-6 Unemployment Spiked during Pandemic

The study points out that the Labor Department's broadest unemployment rate, which includes people classified as “marginally attached” to the labor force, recorded its highest reading on record in November 2009 going back to 1994. 

You’ll recall that this U-6 rate includes those who want to work but haven’t looked for a job recently enough to be classified as unemployed, and people working part-time because they can't find full-time jobs.

The U-6 rate fell steadily starting in 2011 and was below 8.8% — its rate at the start of the Great Recession — from February 2017 through February 2020. 

It then jumped from 8.8% in March 2020 to 22.9% in April 2020 but has since fallen back to 7.3% last December.

The study shows that the employment-to-population ratio of those aged 16 and older remained near its Great Recession low until 2014, when it began to rise as labor force participation leveled off while unemployment continued to fall. 

Nevertheless, in February 2020 it was still 2.6 percentage points below its rate at the start of the Great Recession. 

It fell in March and April 2020 to its lowest rate on record, 51.3.%, although a rebound brought it to 57.4% in October, where it remained through December 2020. 

Further increases in 2021 brought it to 59.5% in December, which was still below the 61.2% rate at the start of the Great Recession. That population includes an increasing number of baby boomers near retirement or already retired — a phenomenon that’s boomed during the pandemic. 

In contrast, the employment-to-population ratio for those in their prime working years (age 25-54), which fell 4.9 percentage points between the start of the Great Recession and December 2009, recovered all of that loss and was 80.4% in February 2020. 

Yet, it remained below the peaks achieved in the 1990s expansion, fell to a recent low of 69.6% in April 2020, and has subsequently risen to 79.0% in December 2021.

Future Employment Growth?

Significantly, marginally attached workers, who are part of the U-6 unemployment rate, are not included in the labor force because even though they say they want a job, they haven’t looked recently enough to be counted as unemployed. Go figure!

If millions of Americans who expect to go back to work at some point are counted as not actively looking, actual unemployment could be undercounted — by a lot. 

The CBPP believes a jobs recovery going forward “continues to depend on how well the virus can be controlled and the degree to which business investment and household spending respond to the Rescue Plan and subsequent recovery measures” that might be enacted.

The Chart Book also looks at how growth in the purchasing power of workers’ wages and benefits hasn’t kept pace with productivity growth, but that’s somewhat off-topic and isn’t covered here.

Importantly, the Center says it “will continue to track the evolution of the economy” as the country continues to blaze a new trail on the paths to a “new normal.”

I hope it does because of the solid perspectives it provides. The Chart Book replaces its predecessor, “The Legacy of the Great Recession,” whose post-Great Recession analysis ended in December 2017.

You can be sure that we’ll continue to follow updates to this study — and analyses by other thinktanks, academics and everyday Americans — as they come to our attention.

With economic uncertainty and financial volatility growing toward modern day highs, you should expect nothing less.