E P I B R I E F I N G PA P E R

Economic Policy Institute ● febr u ar y 2 , 2 0 1 1 ● B riefing P aper # 2 9 4

The
Great Recession’s
Long Tail
Third Anniversary Underscores
Severity of Labor Market Woes
B y Re b e c c a Th i e s s

T
he economic expansion that took place during much of the last decade officially ended in December 2007.
One of the weakest on record, it saw feeble gross domestic product and jobs growth, and was the first business
cycle on record during which the median family income failed to rise. The real value of the minimum
wage declined for more than half the decade, and the gap
between the rich and the poor—or rather the top 1% and
the bottom 99%—continued to grow. This historically
Ta b l e o f Co n t e n t s
weak expansion, however, was nothing compared with
what was to come. (In fact, the 2000s’ historically lack- Job loss.......................................................................................................2
Unemployment......................................................................................4
luster expansion failed to generate the potential cushion Demographic groups..........................................................................6
a robust expansion would have afforded many families, Job openings...........................................................................................8
making the current economic downturn even tougher to Conclusion............................................................................................. 10
weather). The Great Recession, which began in December
2007, officially lasted through June 2009.
Three years after the recession’s beginning we can www.epi.org
piece together a comprehensive vision of where we have
been, and begin to think about where we are going.

Economic Policy Institute • 1333 H Street, NW • Suite 300, East Tower • Washington, DC 20005 • 202.775.8810 • www.epi.org
 Figure a

Indexed job loss in all post-war recessions

Indexed total nonfarm employment (recession start = 100%)

106%

104%

102%
1981
recession

100% 1990
recession

98% 2001
recession

96%

94%
Great Recession
92%
0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36

Months since recession start

note: Grey lines are not labeled but represent recessions starting in 1948, 1953, 1957, 1960, 1969, 1973, and 1980.
Source: EPI analysis of Bureau of Labor Statistics data.

Job loss
In terms of job loss, the picture is bleak. A record number of people are unemployed, with the unemployment rate
hovering well above 9%, the highest it has been since the early 1980s. As Figure A shows, job loss during this recession
is far greater than during any other post-war downturn. Three years past the start of the recession, the labor market is
down a larger percentage of jobs (5.2%) than at any point in any other post-war recession. Figure A compares job loss
in this recession with all post-war recessions, showing that the economy continued to shed jobs for two years after the
recession started.

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 Figure b

Jobs gap

14.3

14.1
3.7
13.9 million jobs 11.0
Number of jobs (in millions)

not gained million

13.7 job
shortfall
7.2
13.5 million
jobs lost
13.3

13.1

12.9

12.7

12.5
Jan.-00 Jan.-01 Jan.-02 Jan.-03 Jan.-04 Jan.-05 Jan.-06 Jan.-07 Jan.-08 Jan.-09 Jan.-10

note: Shaded areas denote recession.

Source: EPI analysis of Bureau of Labor Statistics data.

Job loss, however, is only half the labor market story. As the economy was shedding jobs, the working-age
population continued to grow. Figure B shows that the recession has left us with a shortfall of 11 million jobs, which
includes the number of jobs it would have taken to maintain a stable employment rate while keeping pace with
growth in the working-age population since the beginning of the recession. The labor market has 7.2 million fewer
jobs than when the recession started; it is also down the 3.7 million jobs needed over the last three years in order to
match population growth.

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 Figure c

Unemployment projections

10.0% 9.7% (1982) 9.6% (2011)

9.5%
9.0% 8.7%
8.5%
8.0% 7.5% (1992) 7.8% (2013)
7.5%
7.0% 7.1%
6.5% 6.0% (2003)
Unemployment rate

6.0% 6.1% (2015)

5.5%
5.0%
4.5%
4.0%
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
1980 1985 1990 1995 2000 2005 2010 2015
Note: Data points represent annual averages.
Source: Congressional Budget Office, Budget and Economic Outlook, Fiscal Years 2012-21.

Unemployment
Although the Great Recession officially ended in mid-2009, as Figure C shows, unemployment has been well above
9% since then. Few believe it will dip below 6% before 2014; the latest projections from the Congressional Budget
Office predict the unemployment rate might dip to just above 7% in that year. Although it has not passed the peak
rate of 10.8% it hit during some months in 1982, the current downturn has seen a larger and more sustained increase
in the unemployment rate. In 1982, the unemployment rate jumped from 9% in March to 10.8% in November, a 1.8
percentage-point increase. Yet by October 1983, the rate dropped below 9%. In total, there were 19 months with
unemployment above 9% in 1982 and 1983. From December 2007 through October 2009, however, the unemployment
rate increased 5.4 percentage points, hitting 10.4%. Though increases have abated, we have seen unemployment above
9% for 21 months now, and recovery is projected to continue very slowly. Indeed, in 2013, six years after the beginning
of the recession, the unemployment rate is projected to be 7.8%, just above the peak unemployment rate during the
recession of the early 1990s.

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 Figure d

Underemployment

25

20
Workers (millions)

15
2.7 million discouraged

10 8.9 million involuntary part time

14.5 million unemployed

0
Jan.-00 Jan.-01 Jan.-02 Jan.-03 Jan.-04 Jan.-05 Jan.-06 Jan.-07 Jan.-08 Jan.-09 Jan.-10

note: Shaded areas denote recession.

Source: Bureau of Labor Statistics, Current Population Survey.

While the unemployment rate tells some of the story, the labor market is in even worse shape than that rate reveals.
Because the unemployment rate only measures those looking for work, if workers drop out of the labor force (that is,
stop searching for a job), then they are no longer counted as unemployed. The underemployment rate is a useful
indicator that provides a more comprehensive measure of slack or distress in the labor market. Underemployed workers
include not only the unemployed, but also those who can find only part-time work as well as those who want a job
but are not classified as unemployed because they have given up seeking work.
The number of underemployed has grown in lock-step with the unemployment rate. The total number
of underemployed has grown to over 25 million, as Figure D shows, with the underemployment rate officially
standing at 16.7%.

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 Figure e

Unemployment by race
20%

18%
15.8%
16%

14%
13.0%
Unemployment rate

12% black

10%
8.5%
8% Hispanic

6%

4%
White
2%

0%
Jan.-00 Jan.-01 Jan.-02 Jan.-03 Jan.-04 Jan.-05 Jan.-06 Jan.-07 Jan.-08 Jan.-09 Jan.-10

note: Shaded areas denote recession.

Source: Bureau of Labor Statistics, Current Population Survey.

Demographic groups
Overall unemployment numbers also mask enormous variation in joblessness among different racial and ethnic groups.
Though the overall unemployment rate was 9.6% in 2010, it proved to be much higher for some groups than for others,
as seen in Figure E. The unemployment rate among blacks, for instance, was nearly 16%, and among Hispanics it was
around 13%. With overall unemployment projected to be 8.7% in 2012, we can expect unemployment among blacks
to remain over 15% and among Hispanics to be around 11%.
Unsurprisingly, income losses during the recession have differed by race as well. Income losses for the median black
family have been more than twice as large in percentage terms as they have been for white families. Between 2008 and
2009, for instance, white families experienced a 1.6% decline in real median income, while black households experienced
a 4.4% loss.

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 Figure f

Long-term unemployment as a share of the unemployed

50

45

40

35
Share of the unemployed

44.3%
30

25

20

15 12.7%

10

0
Jan.-00 Jan.-01 Jan.-02 Jan.-03 Jan.-04 Jan.-05 Jan.-06 Jan.-07 Jan.-08 Jan.-09 Jan.-10

note: Shaded areas denote recession.

Source: Bureau of Labor Statistics, Current Population Survey.

The length and severity of this recession has shattered records for long-term unemployment. In fact, this recession
has seen an unprecedented rise in the number of workers who have been unemployed for six months or longer (the
traditional definition of long-term unemployment), and in those who have been unemployed for a year or more or even
99 weeks or more (defined here as the very long-term unemployed). As Figure F shows, at the beginning of the recession
(December 2007), 17.4% of the unemployed were out of work for six months or longer. Two-and-a-half years into the
recession the share of long-term unemployed jumped to 45.2%, and by December 2010 the share of people unemployed
for six months or longer had only dipped slightly to 44.3%, or 6.4 million workers. Like the unemployment numbers,
long-term unemployment has disproportionately affected black workers, who have been more likely than white workers
to have experienced extended unemployment spells. Unemployment can leave permanent scarring effects on the earnings
of workers as well as the future earnings of their children, and these effects can be particularly severe for people who
experience long spells of unemployment.

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 Figure g

Jobs-seekers-to-jobs-openings ratio
7.0
Number of unemployed persons per job opening

6.0

5.0

4.0
oct. 2010: 4.4

3.0 nov. 2001: 2.2

2.0

1.0
Dec. 2007: 1.8

0.0
Dec.-01

Dec.-02

Dec.-03

Dec.-05
Mar.-05

Jun.-08

Dec.-08

Dec.-09
sep.-01

sep.-02

sep.-03

sep.-05

sep.-07

sep.-08
Jun.-01

Jun.-02

Jun.-03

Jun.-05

Jun.-07

Jun.-09

sep.-10
Mar.-01

Mar.-02

Mar.-03

Mar.-07

Mar.-08

Mar.-09

Mar.-10
Dec.-04

Dec.-06

Dec.-07

sep.-09

Jun.-10
Dec.-00

Mar.-06

sep.-06
Jun.-06
sep.-04
Jun.-04
Mar.-04

note: Shaded areas denote recession.

Source: EPI analysis of Bureau of Labor Statistics data.

Job openings
It has been overwhelmingly difficult for people to find work, not only during the official months of the Great Recession,
but in its aftermath as well. High, long-term unemployment is a function of the job market, and job creation has been
overwhelmingly slow. In aggregate, unemployed workers have dramatically outnumbered job openings during the
recession, as Figure G shows. In October 2010, there were 4.4 unemployed workers for every job opening, meaning
there were no jobs available for more than three out of four unemployed workers. At the beginning of the recession,
the ratio of unemployed workers to job openings was 1.8-to-1. At its peak, the ratio was 6.2 people per job opening in
November 2009. So while there have been major improvements, the ratio of job seekers to job openings is still nowhere
near where it was even during the rather weak economic expansion that took place between late 2001 and 2007.
While the job-seekers-to-jobs-openings ratio shows that overall there are nowhere near enough job openings, could
it also be true that a large part of current unemployment is that workers don’t have the right skills for the jobs that are
available? Are these numbers masking profound structural changes in our economy? We should investigate how much of

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 Figure h

Jobs openings and number of unemployed workers by industry (in thousands)

0 500 1,000 1,500 2,000

mining and logging

Construction

Manufacturing

Wholesale and retail trade

transportation and utilities

Unemployed
Information Job openings
financial activities

Professional and business services

Education and health services

leisure and hospitality

other services

Source: EPI analysis of Bureau of Labor Statistics data, 12-month averages (Nov. 2009-Oct. 2010).

the labor market crisis is actually due to structural factors, in order to help inform the correct policy response. If the
jobs crisis is driven by structural factors, then increased education and training to the unemployed could help ease the
necessary job transitions. If the crisis, on the other hand, is driven by a lack of demand, then the appropriate response
would be additional stimulus and monetary policy to bolster demand.
Figure H shows the number of unemployed and number of job openings by industry. If current unemployment was
largely structural, we would see some sectors experiencing a high ratio of job seekers to job openings, and some sectors
that would look more balanced, with employer demand for jobs being more equal to the number of employees looking
for jobs (or even surpassing it). However, there are no major sectors where the latter phenomenon is taking place;
unemployed workers dramatically outnumber job openings in every sector. These data certainly suggest that the economy
is not lacking the right workers (which would be indicative of structural unemployment), but that it is, in fact, simply
lacking jobs across the board.

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Conclusion
Our labor market issues have been and still are largely demand-driven; until demand picks up, the labor market will
continue to struggle. Though the prognosis for the upcoming year is not rosy, it is an improvement upon the last three
years. The economy will add jobs this year, in large part thanks to the stimulus included in December’s tax compromise;
however, it will not add jobs at a rapid enough pace to adequately recover from the last three years. In fact, it could take
many years—up to a decade or more—before pre-recession levels of unemployment are restored. It is clear that demand
continues to need a boost. To ensure this, it is necessary to find adequate replacement for the consumer and business
spending that contracted after the bursting of the housing bubble.

References
Bivens, Josh. 2011. Failure by Design: The Story Behind America’s Broken Economy. An Economic Policy Institute book. Ithaca, N.Y.:
Cornell University Press.

Bureau of Labor Statistics. “Labor Force Statistics from the Current Population Survey.” http://data.bls.gov/pdq/SurveyOutputServlet.

Congressional Budget Office. 2011. “Budget and Economic Outlook: Fiscal Years 2011 Through 2021.” January 26. http://cbo.gov/
doc.cfm?index=12039.

Mayer, Gerald. 2010. “The Trend in Long-Term Unemployment and Characteristics of Workers Unemployed for More than 99
Weeks.” Congressional Research Service. December 20.

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