Friday, July 23, 2010

The 2001 Recession: Employment Issues

We now know that the 2001 recession was caused by three events: a spike in oil prices, 9/11 and the stock market crash. Let's look at how this played out in the jobs market.

Notice the unemployment rate continued to increase after the recession, although it didn't increase to incredibly high levels. However, it hovered around approximately 5.75%-6.25% for almost two years after the end of the recession.

Above is a chart of total non-farm payrolls for 2000-December 2003. Simply eyeballing the chart, notice that total numbers decreased from approximately 132.4 million to a little below 130 million. That means total jobs lost were about 2.4 million.

Above is a chart of total durable goods manufacturing. Eyeballing this chart, notice that total employment fell from about 10.8 million to about 8.8 million -- or approximately 2 million jobs. That means that durable goods manufacturing job losses were the primary reason for the job losses of the early 2000s recession.

Above is a chart of total durable goods manufacturing employment for the early 2000s expansion. Notice that unlike the 1990s expansion, there jobs did not come back.

Above is a chart of productivity. Notice that despite the decrease in durable goods employment, productivity (output per man hour) continued to increase. In addition,

Above is a chart of total durable industrial production. Notice it started to increase at the end of the 2001 recession.

So -- the second jobless recovery was caused by a drop in durable goods manufacturing employment during and immediately after the recession which was not followed by a rehiring of durable goods employees. This is in direct contrast to the 1990s expansion when durable goods employees were eventually rehired. However, this decrease employment was not accompanied by a drop in manufacturing output. In fact, manufacturing output continued to increase, much as it had in the 1990s expansion.