1. Nne Ekeogebde
ECON 410—Sarah Zubairy
October 6, 2014
An Analysis of Employment in Recessions
The National Bureau of Economic Research (NBER), founded in 1920, is a private
research organization devoted to maintaining evaluations of the U.S. business cycle. The agency
is the authoritative source, responsible for analyzing the US economy through reports that
quantify the dates of peaks and troughs characterized as economic cycles. Within this agency, the
Business Cycle Dating Committee, established in 1978, identifies generally accepted indicators
on which they base their official recession announcement. The NBER identifies a recession as a
period between a peak and trough where there is an extensive decline in economic activity,
lasting more than a few months, including a reduction in the amount of goods and services
produced and sold. The Committee does not follow a fixed timing structure when determining
contractions, as a result, peak or trough dates are set when the economic conditions are not in
doubt—usually between 6 to 21 months. In the recession identification process, the committee
applies its judgment based on several measures of broad activity, including real GDP, economy-
wide employment, and real personal income. In conjunction with these broad measures, the
Committee uses real retail sales and the Federal Reserve’s index of industrial production (IP) to
establish more reliable peak or trough dates. This study will show that the Great Recession, by
all respect, was the steepest and most severe downturn the business cycle has experienced since
the Great Depression and was most pronounced in the labor market.
The Great Recession, often considered the worst recession since the Great Depression,
was a natural result of the business cycle. Given the month-to-month volatility in economic
indicators, the Business Cycle Dating Committee did not announce the turning point of the Great
Recession until December 1, 2008, nearly 12 months after the economy peaked in December
2007. The 2007-2009 U.S. recession differed substantially from other post-World War II U.S.

2. Nne Ekeogebde
ECON 410—Sarah Zubairy
October 6, 2014
recessions in that it was trigged by the subprime mortgage crisis, leading to a global banking
bank credit crisis. The crisis was largely a surprise to many policymakers, agencies, investors,
and professionals in academia. The Great Recession stemmed from the bursting of the dotcom
bubble prior to the 2001 recession, and resulted in loose monetary policy, lax financial regulation
and easing of fiscal policy that moved the country from a large budget surplus to a budget deficit.
The Federal Reserve was led to lower interest rates in an effort to support the economic
slowdown. Incidentally, banks created an institution of lending money to individuals and
companies unqualified to pay back their loans and soon countless people defaulted on loans. As
companies found it difficult to pay off a debt, cutting costs meant decreased labor, consequently,
firms were driven to mass layoffs and the increased unemployment resulted in decreased
consumer spending. There was a large decline in labor input in the economic downturn, even in
resilient industries such as retail trade, leisure and hospitality. The notable difference in the
2007-2009 recession was the prolonged downturn in employment, its widespread effect on a
range of job sectors, and the downturn depth relative to any other recession since World War II.
On average, 712,000 monthly job losses occurred from October 2008 through March 2009,
creating the most severe 6-month period of job losses since 1945. The 2001 recession was
different in that it did not affect all sectors of the economy uniformly because consumer
spending remained relatively stable, averaging a 3.8% annual growth rate. Compared to the
Great Recession, the 2001 downturn was a shallow, yet production and investment-led recession.
Industrial production capacity reached a peak in Sept 2000 and declined in each subsequent
month through December 2001, sinking from a long-term average of 82% to 75%. There were
similarities in job loss distribution in the Great Recession by industry to that of the previous two

3. Nne Ekeogebde
ECON 410—Sarah Zubairy
October 6, 2014
recessions —nonfarm employment in manufacturing and construction, which tend to be the most
sensitive, experienced a little more than half of job losses.
Similar to the 2001 recession, the 1990-1991 recession was not deep or long-lasting, and
private investment declined significantly more than consumption. The recession was led by
tightened monetary policy and solvency problems among S&L institutions that created a credit
crunch. The 1990-1991, officially started in July 1990, was preceded by a long period of slow
growth in the working-age population and declines in the participation rate, as well as rising
inflation, weakening real growth, and threat of war in the Persian Gulf. Additionally, sharp
increases in gasoline prices brought sharp declines in auto production, creating a decline in
personal consumption expenditure—an association shared with the Great Recession. In the 1990-
1980 1981 1982 1990 1991 2000 2001 2007 2008 2009
Gross Domestic Product 44.736 45.897 45.02 62.107 62.061 87.107 87.957 103.156 102.855 100
Gross Domestic Investment 46.918 51.048 44.39 66.055 61.699 126.484 118.813 140.787 127.574 100
Personal Consumption Expenditures 40.535 41.137 41.7222 57.608 57.74 82.977 85.129 101.976 101.627 100
0
20
40
60
80
100
120
140
160
1980 1981 1982 1990 1991 2000 2001 2007 2008 2009
Gross Domestic Product Gross Domestic Investment Personal Consumption Expenditures

4. Nne Ekeogebde
ECON 410—Sarah Zubairy
October 6, 2014
1991 recession, employment decreased at a faster rate than the average for previous recessions in
construction and trade, while the finance, insurance, and real estate industry registered its first
recessionary decline. In contrast to the Great Recession, employment in manufacturing, public
utilities, and transportation posted a smaller job declines than in any of the prior downturns. The
demographic profile of employment in this downturn was felt more severely in the service
producing industries, affecting adult women more than adult men who were highly concentrated
in manufacturing.
Seasonally adjusted Unemployment Rate
The early 1980s consists of two recessions, separated by a very short two-quarter
expansion, and are usually referred to as the “double-dip” recession. The double dip recession of
the 1980s were caused by the same economic conditions, and represent the deepest and longest
recession in the post-World War II period. The major driving force of this deep recession in the
early 1980s was the Federal Reserve attempt reduce the inflation rate to a more acceptable level
following sustained inflation rates above 4% since the oil shock of 1973. Industrial production

5. Nne Ekeogebde
ECON 410—Sarah Zubairy
October 6, 2014
and world trade dropped significantly, leading to decreased economic growth figures and
increased unemployment figures. The 1980s recession was similar in characteristic to the Great
Recession, because there was a deeper recession felt across all population much sharper increase
in the unemployment rate and a deeper recession than the mild cases of the 1990-1991 recession
and 2001 recession.
Seasonally adjusted Unemployment Level (number in thousands)
Overall, in every post-war recession discussed here investment declined more than
output, output declined more than consumption, oil prices spiked prior to each recession
timeline, and equity prices declined in nominal terms. Different unemployment dynamics were
found with the Great Recession and were especially pronounced in the labor market, where the
rate of job loss and rate of reemployment were much higher than in earlier recessions. The last
three recessions were similar in that less educated workers were prone to more layoffs than
educated workers.

6. Nne Ekeogebde
ECON 410—Sarah Zubairy
October 6, 2014
Not seasonally adjusted Unemployment Rate
(Unadjusted) Unemployment Rate; 16 years and over
1980 7.1
1981 7.6
1982 9.7
1983 9.6
1984 7.5
1985 7.2
1986 7.0
1987 6.2
1988 5.5
1989 5.3
1990 5.6
1991 6.8
1992 7.5
1993 6.9
2000 4.0
2001 4.7
2002 5.8
2003 6.0
2004 5.5
2005 5.1
2006 4.6
2007 4.6
2008 5.8
2009 9.3

7. Nne Ekeogebde
ECON 410—Sarah Zubairy
October 6, 2014
Citation
1. Goodman, J. Christopher, Mance M. Steven. (April 2011). "Employment Loss and 2007-
2009 Recession: An Overview". Retrieved from
http://www.bls.gov/opub/mlr/2011/04/art1full.pdf
2. Langdon, S. David, McMenamin M. Terence, and Krolik J. Thomas. (February 2002).
"U.S. Labor Market in 2001: Economy Enters a Recession". Retrieved from
http://www.bls.gov/opub/mlr/2002/02/art1full.pdf
3. Gardner, M. Jennifer. (June 1994). "The 1990-91 Recession: How Bad Was the Labor
Market". Retrieved from http://www.bls.gov/mlr/1994/06/art1full.pdf
4. Borbely, M. James. (December 2010). "Sizing Up the 2007-2009 Recesssion: Comparing
Two Key Labor Market Indicators with Earlier Downturns". Retrieved from
http://www.bls.gov/opub/btn/archive/sizing-up-the-200709-recession-comparing-two-
key-labor-market-indicators-with-earlier-downturns-pdf.pdf
5. Belsie, Laurent. (September 2011). "Job Loss in the Great Recession". Retrieved from
http://www.nber.org/digest/sep11/w17040.html
6. Lin, Ta-Win, Schimidt, Jim. (July 2002). "Economic Conditions During The 2001
Recessions (Part I*)". Retrieved from
http://www.ofm.wa.gov/researchbriefs/2002/brief015.pdf
7. McNees, K. Stephen. (January 1992). "The 1990-91 Recession in Historical Perspective."
Retrieved from https://www.bostonfed.org/economic/neer/neer1992/neer192a.pdf

8. Nne Ekeogebde
ECON 410—Sarah Zubairy
October 6, 2014
8. Veenhoven, Ruut, Aldi Hagenaars. (1989). "Did the Crisis Really Hurt?". Retrieved from
http://www2.eur.nl/fsw/research/veenhoven/Pub1980s/89b-C1-full.pdf
9. Hall, E. Robert (May 1993). "Macro Theory and the Recession of 1990-1991". Retrieved
from http://web.stanford.edu/~rehall/Macro%20Theory%20Recession%201993.pdf