Thursday, July 22, 2010

The Early 90s Recession: Employment Issues

First, let's go back to the charts that started this analysis.

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.