LegiStorm

Summary:

The period since 2007 has been a time of significant change for labor markets. The Great Recession of 2007-2009, the longest and deepest recession since the Great Depression, caused the unemployment rate to briefly reach 10%, and labor markets have subsequently experienced a long and gradual recovery. Most labor force metrics, including the unemployment rate and various other measures of labor force underutilization, have returned to levels that have historically been consistent with full employment. Labor Force Participation One exception is the labor force participation rate (the ratio of workers who have a job or are looking for a job to the overall adult population), which began declining before the Great Recession and has only levelled off more recently. The decline in the labor force participation rate is partly attributable to the aging of the population, particularly the retirement of the baby boomers. But even among prime-age workers (age 25-54), participation is historically low for men and has only just rebounded for women from the recession. Participation among young workers also fell sharply during the recession and has not fully rebounded. Economists disagree about whether there will be further recovery in the participation rate; without further recovery, the economy will not be able to continue adding jobs at recent rates. Shifts in the Types of Jobs Both the Great Recession and the continuation of longer-term structural changes have caused employment growth since 2007 to vary significantly by occupation and industry. Employment in goods-producing industries (such as manufacturing and construction) was hardest hit by the recession and had still not recovered by 2017, whereas employment has grown in 9 out of 10 service-producing industries over that period. When viewed by occupation, employment growth since 2007 has been concentrated in certain occupations with low median wages (food preparation and personal care) and high median wages (healthcare practitioners, business and financial operations, computer and mathematical, and management), while the decline in employment share has been concentrated in certain middle-wage occupations (production, office and administrative support, and construction). This pattern has been referred to as the “hollowing out” or “polarization” of labor markets, and has been attributed largely to technological change and globalization. Outcomes for Demographic Groups Employment outcomes vary widely across demographic groups. Employment rates have been persistently lower for young workers, lower-educated workers, and black workers. In addition to changing opportunities for those workers, the Great Recession hit those groups harder, with some lasting effects. Men were more likely than women to participate in the labor force and be employed, but women’s employment rates rose relative to men’s over the 2000 to 2007 period. High unemployment in male-dominated industries (construction and manufacturing) and low unemployment in female-dominated industries (health care and education) contributed to relatively higher male unemployment during the recession. Although unemployment rates for both sexes ultimate recovered, men’s labor force participation rates trended downward over the last 10 years while women’s were largely unchanged. Looking Forward Going forward, policymakers face several labor market challenges, including (1) accommodating the current tightness in labor markets, while preparing for a return to recession at some point; (2) the continuing slowdown in the growth of the labor force (from 1.4% between 1980 and 2000 to 0.6% between 2000 and 2015); (3) addressing the labor market impacts of structural changes posed by technological change and globalization; and (4) a decline in labor market dynamism (e.g., fewer workers switching jobs).