Initial unemployment claims remained high for over a year after the end of the 1990s recession. In addition,
The unemployment rate continued to increase after the end of the early 90s recession. Let's look a little deeper into the employment statistics to see what jobs were lost.
Above is a chart of total non-farm employees for the years 1989-1994. Notice a few points.1.) From an employment perspective, the recession was mild -- the economy only lost 1.621 million jobs.
2.) The recession ended in March 1991, yet total employment did not reach pre-recession highs until early 1993 -- nearly two years after the recession ended.
Let's divide the economy into manufacturing and service sectors.
Above is a chart of total manufacturing employment. First, notice it started declining in roughly early/mid 1989 -- a full year before the recession started in 7/90. Notice how it continued to decline after the recession ended in 3/31. Finally, notice that over three years after the recession ended, the level of employment was far below the pre-recession high. From the high on this chart to the low of this chart manufacturing lost 1.320 million jobs. By the end of this chart (12/94), total manufacturing employment was down 842,000 from its pre-recession highs.
Compare the total manufacturing job loss totals to the service sector job loss totals. At their worst, service sector employment dropped by 395,000 in the early 1990s recession. In addition, total service employment had returned to pre-recession levels by early 1992 -- a year after the recession ended.
Let's add two more charts: employment for durable and non-durable employment:
Remember that total manufacturing employment decreased by 1.3 million over the recession at maximum employment losses. Total employment of durable goods manufacturing contracted over 1 million, meaning it bore the brunt of the losses.
Non-durable manufacturing lost the obvious remainder of jobs. with losses totaling a little over 150,000.
Above is a chart of durable goods manufacturing employment for the entire recovery. Notice it took nearly the entire expansion -- 6 years -- before the durable goods sector returned to near the level it reached before the recession.
Above is a chart of output per hour of manufacturing employees. Notice that despite the decrease in employment that lasted after the recession ended, output per hour increased. This is one of the main reasons manufacturing employment did not rapidly increase at the end of the recession.
Above is a chart of service sector employment for the duration of the 90s expansion. Notice this is where a bulk of the job creation occurred. However, the recession ended in 3/91, year employment did not ramp up until the end of 92, over a year after the end of the recession.S0, the first jobless recovery was primarily caused by a massive contraction in durable goods manufacturing. These jobs did not come back until nearly the end of the expansion -- over 8 years after the end of the previous recession.
3 comments:
This, and not total output, is why they say, "Manufacturing is dead in America." They've been playing musical chairs for at least three decades now.
Food for thought: Are the recessions merely free-market "corrections", or the inevitable downer after a bubble-induced high?
If we spend 90% of our years in artificially inflated manufacturing booms, it's not the booms that are normal. It could be that we've been struggling (and, for the most part, succeeding) to find stuff for our blue-collar workers to do since the 1880s.
Dragonchild: You ask a very good question. Many economists would look at the data and say that the recessions of the post-WWII era all seemed to follow a period of spike in oil prices and rising interest rates. However, the 2008 downturn was more like the Great Depression and Long Depression that seemed to come after your "bubble-induced high." In other words, like The Great Depression, the 2008 recession was a "balance sheet recession."
That is why in the short run I am less optimistic than Bonddad. It's going to take a long time to leverage down the economy. Recent economic data showing a decline in the Leading Index of Economic Indicators, falling consumer confidence, and disappointing revenue reports from companies on Wall Street signal that a double dip recession is imminent.
The difference between the 92-94 recovery period compared to now is that back then there was still significant investment in domestic manufacturing, even despite many jobs being moved abroad or being killed off by foreign competition at the same time. In this period in contrast, there is extremely little investment in domestic manufacturing. Investment did go up in some areas of the economy in 2007 and 1H 2008 (steel, energy, cranes, mining equipment) with the export boom due to a weak dollar and strong growth in Europe and China, but it's unlikely that any export boom will occur over the following years unless the dollar weakens substantially from here and growth picks up in Europe (and if China can continue its growth path, which is unlikely considering its construction and investment bubble).
The primary reason for the lack of investment in US manufacturing right now has occurred has mainly been the result of China's entry into the WTO in 2001. Although a combination of lower labor costs, a weaker currency, favorable tax policy, no unions, less regulation, and much greater growth potential in China and other emerging markets simply makes the US a much less attractive place to invest in comparison. One reason the 2003-2008 economic boom in the US was lackluster compared to past booms, was because so much production had left the country and imports were subtracting nearly $800 billion per year from GDP. Much of the extra liquidity thrown at the US market in the form of credit expansion, low interest rates, fiscal stimulus, and tax cuts, leaked right out of the economy like a sieve, and it will do so again if policy doesn't change.
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