Atlanta Fed 2013 Annual Report: Employment
Employment Recovery Has Been Historically Slow

The nation's labor market has recovered far more slowly after the Great Recession than it did following every other economic downturn since World War II. To be sure, employment growth was promising in 2013, and the unemployment rate declined.

Other measures of the labor market remained subdued, however. The compensation to workers—including benefits and adjusted for inflation—has barely risen above its prerecession level. At year's end, almost 38 percent of unemployed people had been jobless for at least 27 weeks, by far the highest percentage of long-term unemployment since World War II. Moreover, 12.6 million people left the labor force in the six years through December 2013.

By any measure, the labor market healing has been gradual. Consider that it took 10 months on average for the United States to regain all the jobs lost during seven recessions between 1950 and 1989. It’s taken increasingly longer to recover lost jobs in each subsequent downturn.

This recovery has been the slowest yet. From the prerecession employment peak in 2007, total U.S. nonfarm employment declined by 8.7 million jobs. At the end of 2013, almost five years after the recession’s end, the nation’s labor market was still roughly a million jobs shy of that peak.

The muted pace of the jobs recovery has not been the result of just a few underperforming sectors. Employment in private service–providing industries, for example, now exceeds the level it had reached before the Great Recession. But the increase in service-sector jobs is still 20 percentage points below the average improvement enjoyed in recent recoveries.

The labor market recovery has been even more constrained by weakness in other major sectors. A long-term decline in manufacturing employment accelerated during the recession. Factory job numbers ticked back up a bit last year. Still, as 2013 ended, manufacturing employment remained below its cyclical peak in 2007 and at a level roughly equal to that of 1940, according to the U.S. Bureau of Labor Statistics.

Construction employment fared even worse. The number of construction jobs declined 30 percent during the Great Recession. At the end of 2013, construction employment was still nearly 25 percent below the prerecession high.

Unlike the manufacturing and construction sectors, public-sector employment traditionally withstands downturns relatively well. During this cycle, however, governments at all levels slashed staffing as revenues tumbled. Local government, the biggest public-sector employer, cut the most jobs. Like the manufacturing and construction sectors, government employment was still below its prerecession level at the end of 2013.