Great Recession? Meet the terrible recovery.
The Great Recession was hard enough. Now the weakest recovery in postwar history is proving difficult for workers, investors, and especially the unemployed.
Everyone knows the recession was tough. But in some ways, the aftermath is proving just as difficult, especially for those out of work.
Even if the United States does not slip back into a recession, this is hardly a recovery to celebrate. Jobs are scarce. Bouts of unemployment are long. Even those workers who lost a job and managed to find a new one typically earn less at their new position.
The Great Recession and its aftermath have been setting records of all the wrong kind. The recession was not only the steepest downturn since World War II, it also wiped out all the economic growth of the previous expansion – a first for the postwar era. It has been followed by the weakest recovery of the era.
This one-two punch of the Great Recession and terrible recovery has huge economic and political ramifications for the nation, which is trying to balance growth and debt reduction, as well as President Obama and Congress, who face election next year. Its broad and deep effect on American workers is only now coming to light.
Nearly 1 in 6 American workers lost a job during the Great Recession, the highest job-loss rate in at least 30 years, according to new research from Princeton University economist Henry Farber. Most every sector was hit – from construction to finance. So were workers of every stripe, even well-educated employees: 1 in 9 college graduates lost a job during the Great Recession.
The mean duration of unemployment peaked at a record 35 weeks, nearly twice as long as the peaks in any of the previous three downturns.
Until now, the recovery from the mild 2001 recession was America's most sluggish recovery. It was called the "jobless recovery" because it took nearly three years after the recession started for the economy to recover all the jobs it had lost.
This recovery is worse. Three years after the Great Recession began, the economy was still 7.7 million jobs short.
This job loss has proved devastating for many job seekers. As of January 2010, fewer than half of those who lost a job during the recession were reemployed, Dr. Farber points out. That means that if you lost a job during the Great Recession, the odds of being employed last year were worse than 50-50 – a first in Labor Department data that stretches back 30 years.
Even if they found employment, workers who had lost a job in the recession were earning, on average, 17.5 percent less per week than in their old jobs, according to Farber. That's the largest decline since 1984. Among those who lost full-time jobs, the loss was even greater: an average 21.8 percent. One reason: About 1 in 5 of those reemployed workers was now working part time instead of full time.
All these trends were under way even before the economy hit the so-called soft patch this spring. Since then, the number of unemployed has been rising. In May, there were 13.9 million unemployed and just under 3 million job openings, according to other Labor Department data followed by economist Heidi Shierholz of the Economic Policy Institute, a liberal think tank in Washington. That means that for nearly 4 in 5 unemployed workers, there were no jobs available.
If there is a potential bright spot in all this, it is that this is as gloomy as it gets. Although the threat of recession has increased, many economists still expect growth to pick up and, with it, job numbers. It will be a slow and grinding recovery, but at least headed in the right direction.
•Laurent Belsie is the Monitor's business editor.