Comparisons on the third anniversary since recession started
As shown in the charts below, this business cycle is the only one since the 1930s to still be suffering a job loss after three years. The private sector has lost 2.5% of its jobs (2,792,000), U.S. manufacturing has lost 15.9% of its jobs (2,704,000), and even when incorporating the 3.1% gain in government jobs (657,000), the labor market on the whole has still lost 1.5% (2,135,000) of all jobs. In the prior three business cycles, instead of still being in the hole, the economy had actually generated 2.7% more jobs after three years.
Not surprisingly, poor job creation has led to higher unemployment: a 1.4% rise from 4.2% in early 2001 to a 5.6% unemployment rate in early 2004 (first quarter). In and of itself, this 1.4% rise in unemployment over the last three years is as high as the increase in the first three years of the business cycles in the 1970s, 1980s, and 1990s. But when one accounts for the historically large drop in labor force participation over the last three years—that is, by incorporating the missing labor force (see charts below)—then the 3.1% rise in unemployment has been even larger in this downturn than in prior downturns (up 0.7%).
One of the most remarkable aspects of the current downturn is that total wage and salary income (inflation adjusted) has not risen at all in the last three years. Moreover, the total wages and salaries generated by the private sector have actually fallen by 1.7%. Meanwhile, domestic profits grew by 57.5%. In other recent downturns total wages and profits grew in tandem, with total wage and salary income up by 3.7% over a comparable three-year period and domestic profits up by 12.6%.
Productivity has grown far faster, increasing 13.6% so far in this cycle versus a 6.2% increase in the same period of the last three business cycles. This greater productivity growth, however, has not translated into faster hourly wage growth, which was only slightly faster in this period compared to other cycles (2.2% compared to a 1.3% decline).
Bush Administration's tax cuts falling short in job creation
Since the official end of the recession in November 2001, total jobs have shrunk by 323,000 (an 0.2% contraction) and private-sector jobs have dropped by 560,000 (or 0.5%).
Copyright © 2004 by The Economic Policy Institute. All rights reserved.