An Uneven Road, Then a Cliff: US Labor Markets, 2000-10

Harry J. Holzer and Marek Hlavac (Georgetown Public Policy Institute)

Holzer and Hlavac will analyze earnings and employment outcomes in the U.S. over two recent periods by comparing them to earlier business cycles. They will juxtapose the overall labor market performance over the complete labor market cycle of 2000-2007 with the previous full cycle of 1989-2000 and with earlier ones as well. The current, severe recession that began in late 2007 will be compared to earlier downturns – both milder (1989-1992, 2000-2003) and severe (1979-1983).

Using the Current Population Survey, which contains data on both earnings and employment, as the primary data source, the researchers will analyze employment rates and earnings as primary labor market outcomes. Key themes will be the aggregate outcomes and how they were distributed across demographic groups (age, race, gender, foreign-born status) and other labor market categories (occupations, industries, regions).

The period 2000-2007 experienced very high productivity growth (of about 2.5 percent a year) but virtually no growth in median real earnings, as conventionally measured. This is contrast to the 1990s, when high productivity growth was somewhat widely shared in the labor market; and also earlier periods, when productivity growth itself was more modest. In an era of when earnings growth overall has deteriorated and become quite modest, they will consider the extent to which the patterns of variation across groups and sectors are constant or fluctuating over time, and what factors might account for it.

Also under analysis: unemployment and employment outcomes (such as unemployment rates and length of unemployment spells) for the downturn periods; how the burden of the 2007-2010 recession is distributed across groups in the labor market; the extent to which that burden has shifted over time; and the likely labor climate during the first several years of the next decade.

Although unemployment trends began before 2007, the 2007-2010 downturn has already exceeded in magnitude anything since the 1930s, including 1979-1993. Men, blacks, Hispanics, the less-educated and the young are experiencing the largest declines.

“One of the stories is that there’s a very slow recovery from this recession,” Holzer said. “The groups who are suffering from it are continuing to suffer, especially given the dynamics of the labor market. Even in the best years of this decade, employment rates never quite recovered to their peaks in 1999-2000, and real earnings stagnated as well. And things have gotten much worse since 2007.”