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The US Labor Market During and After the Great Recession

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The US Labor Market During and After the Great Recession The U.S. Labor Market During and After the Great Recession: Continuities and Transformations arne l. Kalleberg and t ill m. von Wachter The Great Recession of 2007–2009 created the ficially over, as assessed on the basis of the largest economic upheaval in the United States dating procedure of the National Bureau of since the Great Depression of the 1930s. Al- Economic Research.1 though economic downturns are a recurring As a result, during the Great Recession un- phenomenon, the most recent recession was employment rates skyrocketed, housing prices exceptional in its duration and depth. It was and stock portfolios plummeted, and the lives the longest recession since the Great Depres- of millions were disrupted. By some measures, sion. At eighteen months, from December 2007 over 30 million individuals lost their jobs, and to June 2009, it exceeded the sixteen- month the rate of long- term unemployment doubled recessions of 1973–1975 and 1981–1982; the av- its historical high (Song and von Wachter 2014). erage period from peak to trough of post– Household net worth dropped by 18 percent, World War II recessions was 11.1 months. The or more than $10 trillion, the largest loss of Great Recession was also especially severe; wealth in the fifty years since that the federal both GDP and number of jobs declined by government has collected data on wealth ac- about 6 percent and median family incomes cumulation (Jacobsen and Mather 2010). The declined by about 8 percent. The Great Reces- Great Recession did not affect all subgroups sion was particularly worthy of its name be- within the population equally; rather, the im- cause of the protracted slump in employment pacts of the economic downturn differed for that followed even after the recession was of- different groups, according to their members’ Arne L. Kalleberg is Kenan Distinguished Professor in the Department of Sociology, University of North Caro- lina at Chapel Hill. Till M. von Wachter is associate professor in the Department of Economics at the Univer- sity of California, Los Angeles. © 2017 Russell Sage Foundation. Kalleberg, Arne L., and Till M. von Wachter. 2017. “The U.S. Labor Market Dur- ing and After the Great Recession: Continuities and Transformations.” RSF: The Russell Sage Foundation Journal of the Social Sciences 3(3): 1–19. DOI: 10.7758/RSF.2017.3.3.01. Direct correspondence to: Arne L. Kalleberg at [email protected], CB#3210 Hamilton Hall, University of North Carolina, Chapel Hill, NC 27599; and Till M. von Wachter at [email protected], Department of Economics, 8283 Bunche Hall, Mail Stop: 147703, Los Angeles, CA 90095. 1. Recessions, as defined by the Business Cycle Dating Committee of the National Bureau of Economic Research (2010), are periods of a “significant decline in economic activity . [that] can last from a few months to more than a year.” The committee’s definition of what constitutes a recession is not fixed, but rather is based on its judgment of the behavior of various indicators of economic activity, such as declines in real gross domestic product (GDP), real income, employment, and industrial production and wholesale- retail sales. Since World War II, the NBER has declared eleven recessions (1948–1949, 1953–1954, 1957–1958, 1960–1961, 1969–1970, 1973– 1975, 1980, 1981–1982, 1990–1991, 2001, and 2007–2009). There have been twenty- two recessions and recover- ies since 1900. 2 the u.s. labor mar Ket during and after the great recession gender, race, and ethnicity. Men, the less- recovery, several articles in the volume contrib- educated, and African Americans were espe- ute new empirical findings that inform our un- cially hard hit. derstanding of alternative economic channels. The profound impact of the Great Recession The article by Jesse Rothstein studies how the has prompted numerous studies by social sci- role of mismatches and wage growth evolved entists of its causes and consequences for before and during the Great Recession and has individuals, their families, communities, and continued to evolve since its official end. Brian society more generally (see, for example, L. Levy, Ted Mouw, and Anthony Daniel Perez Grusky, Western, and Wimer 2011; Danziger examine the role of regional mobility in the 2013; Card and Mas 2016). This research has adjustment process. Erling Barth, James Davis, tracked economic outcomes such as the im- Richard Freeman, and Sari Pekkala Kerr study pacts of unemployment on poverty, economic the role of establishments in job destruction inequality, and earnings growth, as well as so- during the Great Recession and the job creation cial outcomes such as marriage and fertility, that followed. In the final article, Henry S. Far- education, health, politics, and child develop- ber, Dan Silverman, and Till von Wachter pro- ment, throughout the recession and the im- vide new evidence on the extent of hysteresis mediate recovery. From these and other studies in the U.S. labor market during the recovery. we have made important progress in under- By helping to assess the nature of the Great standing some of the consequences and mech- Recession, these studies also inform other im- anisms of the Great Recession. Yet many ques- portant yet understudied issues: the mecha- tions remain as to the nature and consequences nisms behind the protracted and costly losses of the Great Recession and its aftermath. in earnings and long- term unemployment fol- The passage of nearly ten years since the lowing widespread job destruction during the NBER declared the official beginning of the Great Recession. Great Recession in December 2007 puts us in Several articles in this volume also examine a better position than we were earlier to under- the direct impact of job loss and unemploy- take deeper analyses of the sources and conse- ment on workers. Although this question has quences of the protracted recovery on workers, received more attention in the literature than families, and communities. We can thus begin some others, several open questions remain. to assess with greater confidence the extent to William Dickens, Robert Triest, and Rachel Sed- which the changes wrought by the Great Reces- erberg contribute to the complex but crucial sion represent structural and transformative question as to the extent to which workers are changes, whether these are continuations of able to self- insure against income losses dur- the kinds of structural changes that began in ing job loss. In three separate articles, Kelsey the mid- 1970s, or whether these are relatively O’Connor; Gokce Basbug and Ofer Sharone; temporary features associated with business and Daniel Schneider further examine the so- cycles. cial consequences of unemployment on the so- Like the collections of studies about the cial outcomes (on happiness, mental health, Great Recession cited above, this issue of RSF: and teenage fertility, respectively), other impor- The Russell Sage Foundation Journal of the Social tant but understudied areas. This volume of Sciences is also devoted to understanding some the journal also takes up the impact of the of the characteristics of the U.S. labor market Great Recession on the institutional environ- during and after the Great Recession. The ar- ment in the labor market, a subject neglected ticles in this issue deal with several important so far in the literature. The political storm questions about the nature as well as economic around public sector unions in the aftermath and noneconomic consequences of the Great of the Great Recession has shown that eco- Recession. Despite much work, ongoing con- nomic conditions can interact with and affect troversy reigns as to the potential causes of the political and institutional landscapes. Ruth Great Recession and the protracted weakness Milkman and Stephanie Luce take up this ques- in the labor market that followed. With the ben- tion in their study of the evolution of unions efit of having access to data spanning the long in the context of the Great Recession. rsf: the russell sage foundation journal of the social sciences continuities and transformations 3 The GreaT recession in economic, some fraction of the recovery that did occur PoliTical, and social conTexTs was a result of the reduction in the target We begin by putting the Great Recession in his- rather than due to actual growth. torical perspective by comparing it to previous At the same time, recovery in the labor mar- recessions on a variety of dimensions and situ- ket has been slow. Although the rate of unem- ating it in relation to broader social and eco- ployment has fallen close to pre- recession lev- nomic trends. We also briefly summarize the els, it has taken nearly ten years after the start current understanding of the mechanisms be- of the Great Recession to do so, by far exceed- hind the Great Recession, thus indicating how ing the period of recovery after previous down- the contributions in this volume help to ad- turns. Moreover, the gradual but steady decline dress ongoing debates. in the official unemployment rate masks sev- eral related phenomena that signal continued Taking Stock of the Great weakness in the labor market. The number of Recession and Its Aftermath marginally attached and discouraged workers Apart from its intensity, the Great Recession during the Great Recession rose substantially, initially resembled in many ways a large post- and the labor force participation rate declined. war recession, such as the downturns in 1975 The fraction of workers reporting involuntarily or 1982. For example, while the decline in GDP working part- time for economic reasons re- and the rise in unemployment were unusually mains high. For example, as of March 2016, the steep, the unemployment rate at its peak was fraction of individuals among the total labor about the same as in the 1982 recession.
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