A Closer Look

U.S. | Less Than 6 out of 10 in employment, much worse than that of any of the other four recent recessions

The employment-population ratio is another useful measure for evaluating labor market conditions, as it provides a somewhat different perspective than the unemployment rate. The labor force—the denominator used in the calculation of the unemployment rate—may expand or contract in response to changes in the pace of economic activity. In contrast, the civilian noninstitutional population, the denominator for the employment population ratio, tends to grow regardless of economic conditions.4 The employment-population ratio typically decreases during recessions and for the 2007–09 recession, the decline was especially severe. At the start of the recession in December 2007, the employment-population ratio was 62.7 percent. When the recession ended in June 2009, the ratio was 59.4 percent, down by 3.3 percentage points. The employment-population ratio continued to decline for the second half of 2009, and had fallen by 4.5 percentage points by December 2009. The ratio then rose slightly in the first half of 2010, but had fallen back to 58.2 percent by November 2010. (See table 2 and chart 2.)

. For the 1981–82 recession, the deepest decline in the employment-population ratios was 2.0 percentage points and for the 1974–75 recession, it was 2.4 percentage points. Shortly after the 1981–82 and 1974–75 recessions ended, the employment-population ratio began to trend up, more slowly after the 1974–75 recession, and more quickly after the 1981–82 downturn. For the 1981–82 recession, the employment-population ratio reached its pre-recession level 15 months after the recession ended. After the 1974–75 recession, the ratio increased, but did not reach its pre-recession level until late 1977, more than 2 years after the business cycle trough. The reductions in the employment-population ratio for the 2001 and 1990-91 recessions, at 2.3 and 1.6 percentage points, respectively, were about in line with the deepest declines for the 1970 and 1980 recessions. The periods that followed the 2001 and 1990–91 recessions were not, however, particularly strong recoveries in the labor market. After the 1990–91 recession, the ratio did not return to its pre-recession level until late 1994. As for the 2001 recession, the employment-population ratio never returned to the rate it had reached prior to the recession. (See chart 2.)

During the 2007–09 recession, men accounted for the majority of the employment loss and experienced a greater percentage point decrease in their employment-population ratio than did women. This pattern is similar for past recessions. However, the demographics of the labor market have changed considerably since the 1970s and 1980s. During the 1970s, 1980s, and 1990s, the labor market experienced a large influx of women and the employment-population ratio of women increased significantly, peaking in April 2000 at 58.0 percent. As table 2 shows, declines in the overall employment-population ratio during the 1990–91, 1981–82, and the 1974–75 recessions were not fully shared by women. The drop in the employment-population ratio for women during these three recessions did not reach 1 percentage point. In contrast, for the 2001 and 2007–09 recessions, the employment-population ratio for women declined by 2.0 and 3.2 percentage points, respectively, and these decreases were more comparable with the declines for men than had been the case in earlier downturns.

Source: bls.gov

via Sizing up the 2007–09 recession: comparing two key labor market indicators with earlier downturns.

Source: bls.gov/opub

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