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Progress erasing the jobs deficit was slow for some time, but the economy has now recovered the 8. Nonfarm payroll employment was 7. Surpassing the pre-recession peak was a milestone on the way to a full jobs recovery, but population growth over the past several years means the potential labor force is larger than it was then. Job creation has averaged , a month over the past 12 months and , over the past three months. The unemployment rate rose far higher than in the previous two recessions and far faster than though not quite as high as in the deep recession.
Technically, the recession that began in December ended in June as the economy began growing again, but the unemployment rate did not fall to 5. The unemployment rate has been under 4. The relatively modest pace of job growth in the first years of the recovery kept the unemployment rate high long after the end of the recession. This is similar to what happened in the previous two recessions, and does not resemble the fairly rapid decline that followed the severe recession. The unemployment rate is much lower now than it was early in the recovery, but there still may be people who are not working but want to be or people who would like to be working full time but can only find part-time jobs who can be pulled back into the labor market or more easily find full-time work if job creation remains strong.
The sharp rise in the unemployment rate and discouragement over the prospects of finding a job caused a decline in the percentage of the population in the labor force those either working or looking for work. As a result of rising unemployment and declining labor force participation, the percentage of the population with a job fell sharply in the recession and stayed low through much of the recovery. It began to move up in and as falling unemployment offset still-falling labor force participation. The labor force participation rate averaged The labor force fell by , in August, as the number of people unemployed fell by 46, and the number of people with a job fell by , The employment-to-population ratio shown in the chart is for those aged 16 and older and includes an increasing number of retired baby boomers.
Thus, a significant percentage of the shortfall from its level at the start of the recession reflects demographic trends rather than labor market weakness. While this rate remains 2. Long term unemployment reached much higher levels and persisted much longer in the Great Recession and subsequent jobs slump than in any previous period in data that go back to the late s.
The worst previous episode was in the early s, when the long-term unemployment share peaked at Moreover, in the earlier episode, a year after peaking at 2. It took six years from the end of the Great Recession to reach that rate, which it did in June of That rate has edged down since then and was 0. Still, over a fifth The Labor Department's most comprehensive alternative unemployment rate measure — which includes people who want to work but are discouraged from looking and people working part time because they can't find full-time jobs — recorded its highest reading on record in November in data that go back to This rate has been below 8.
Average hourly earnings of employees on private payrolls grew modestly through much of the recovery, and to date have averaged 2. Overall GDP grew 3. To understand the complete relationship between consumer spending and employment, we must also evaluate the relationship between all GDP components and employment as well.
Focusing on consumer spending, this section covers employment related to each final demand component annually during the latest recession and the recovery years through The section concludes with an analysis of long-run trends affected by the recent recession. Tables 2 and 3 document output and employment levels in the recession tied to each final demand component, as well as showing projections to Tables 1 and 4 break out domestic PCE and consumer-related employment by major sector—which are reviewed in more depth in the next section—and figure 6 illustrates quarterly PCE from through Figures 7 and 8 plot the output and employment path of each final demand component in comparison with levels, 32 while figure 9 shows the net annual change of employment that is related to each final demand component.
At that time, Goods-producing industries claimed 8. As the housing market collapsed and the financial crisis ensued, spending and employment relating to private fixed investment—which includes spending on structures, equipment, and software related to production—continued to decline from its peak, sparking economic contraction see figures 7—9. Employment supported by consumer spending decreased slightly as consumer-supported jobs fell by 7, see figure 9 and table 3.
Nearly all PCE-related employment declines were confined to goods-producing industries see table 4. Investment-related employment essentially accounted for the entirety of job declines for the whole economy in Government-related spending and employment at the federal level increased, while state and local government-related spending and employment remained virtually flat.
Export-related spending and employment increased slightly see figures 7—9.
This was the lowest PCE value registered in the recession. Services were particularly affected, especially transportation, food services, recreation, and financial services.
PCE-related employment declined that year by 2. More PCE-related and total jobs were lost in than any other year in the recession see figure 9 and table 3. Excluding government-related employment gains, lower consumer spending was associated with one-third of the 6. Half of the 6. Exports have been a bright spot in the U.
Meanwhile, employment related to federal, state, and local governments increased by a combined , Consumer spending slowly recovered through after bottoming out in the second quarter of The revival in spending, however, was the weakest since the s, especially for services and nondurable goods. With weak growth, in PCE contributed less to GDP growth than did gross private investment—the first time since Typically, employment tends to lag output in recovery from recessions.
This held for PCE-related and, consequently, total employment in the latest recession. Even as PCE slowly recovered, PCE-related employment continued to decline through with , fewer jobs—a smaller decrease than in —as the economy began to turn around see figures 8 and 9. In contrast, employment levels increased or decreased the same year that output levels did for the investment, export, and government sectors in the Great Recession.
PCE-related employment recovery was also impaired by weak spending on labor-intensive services and lower purchases towards goods-producing industries.
A similar number of consumer-related jobs in goods-producing industries were lost a decline of , jobs as service-providing ones a , decline in see table 4. Consumer-related employment accounted for the majority State and local government-related employment, experiencing its first decline in this business cycle, accounted for the remainder of the decrease. Meanwhile, export-related employment improved, while investment-related employment remained essentially flat. Employment and spending related to the federal government peaked in , supported by the employment increase with the administration of the Census see figures 7—9 and tables 2—3.
In total, the number of jobs tied to consumer demand declined by 3. By , PCE-related employment stood at levels last seen in The recession had a disproportionate impact on goods-producing industries: Services accounted for the remaining The total economy experienced a net decline of 7.
This represents a 5. After federal government—related employment increases are excluded, a total 8. PCE-related employment accounted for over a third of this decline— Because of its cyclical nature, investment-related employment experienced much larger and more rapid declines than all other sectors of the economy: Many of those jobs were related to the construction industry.
The remainder of the decline between and was in export-related employment 4.
Bureau of Labor Statistics. After federal government—related employment increases are excluded, a total 8. Overall GDP grew 3. Lower consumer spending correlated with the most PCE-related job reductions in the retail trade industry, which declined by , jobs. Though most attention in this article is given to — and projections through , long-term trends for consumption and employment use a time series dating back to
In consumer spending grew 2. The 3-year journey back to spending levels was the slowest recovery from recession since World War II. In overall employment increased by 1. Federal government—related employment began to decline from its peak, while export-related employment reached levels. Declining government-related employment at the federal, state, and local levels, as well as weak investment-related employment growth, were the primary causes of low employment growth in see figures 8—9 and table 3.
In consumer spending and its related employment expanded slower than in , as the unemployment rate remained elevated around 8 percent in the United States and the Eurozone slipped into another recession. In PCE-related employment finally recovered recessionary losses see figure 8. Because the time series of employment relating to consumption only extends back to , the recovery from the latest recession can only be compared with the recession. In the recession, PCE-related employment took 3 years to recover to highs, and total employment took 4 years to recover. In the most recent recession, PCE-related employment recovered in 5 years, while total employment required 7.
The quicker recovery of PCE-related employment in comparison with the overall economy reflects the relatively stability of consumption during the business cycle, the strong performance of some of its subsectors see next section , and the negative toll of low investment spending on broader economic recovery in the latest recession. In contrast to PCE-related employment, total employment expanded faster in than in as investment spending began to show stronger recovery see figure 9 —nonetheless, the overall employment growth rate remained lower than rates typically seen following recessions.
In addition to slow consumer-related employment growth, declining government-related employment and diminished export-related growth all hindered overall job growth in Total employment stood 3. Despite the historic decline in spending, consumers nevertheless supported a higher proportion of jobs during the latest recession than they had from the inception of the data series in through , although the percentage of employment related to consumer spending from to was still within the long-run historic range see figure 3.
Between and , consumer-related employment fluctuated between 60 and 62 percent of total employment—at the lower end of the historic range dating to the late s—when the percentage of investment-related employment increased to fuel economic expansion. But in , the worst year of the recession, PCE-related employment increased to 63 percent of U. In fact, investment-related employment declined to levels previously unobserved in this time series which, as previously noted, dates back to The larger role of consumption during the latest recession and recovery reflects its stability in comparison with other GDP components in the business cycle; the relative stability has been a consistent pattern with all recessions following WWII.
The relative stability also reflects the positive performance of specific sectors for PCE-related employment in the recession, as is discussed in the next section. Furthermore, the larger percentage of PCE-related employment as a share of all employment underscores the severity of the recession. As seen in figure 3, PCE-related employment as a percentage of all employment tends to increase during economic contractions, when investment-related employment declines more rapidly, and decrease during expansions, when investment-related employment rises more quickly.
Figures 7 and 8 also demonstrate the volatility of each GDP component and the whole economy for output and employment and further reveal the relative stability of PCE. This section analyzes PCE-related employment at the major sector and detailed industry levels, including the most consumer-dependent industries, from through For major sectors, it analyzes overall — employment changes, specific declines in the year when consumer-related employment constituted the majority of job declines , and the recovery.
For detailed industries, the research focuses on — changes exclusively. The section then concludes with an analysis of long-run sector trends that were affected by the recession. PCE-related employment by major sector. A few sectors were not as affected by the latest recession, and they added PCE-related employment from to Because of the aging of baby boomers and the increased demand for health care, the health care and social assistance industry added nearly 1.
With tight economic conditions, enrollment in postsecondary education programs increased—especially community colleges—leading to over , more PCE-related jobs in educational services. State and local government employment related to consumers grew 2. These jobs included mostly transportation and enterprises such as utilities, transit systems including parking and tolls , and gambling. Consumer-related employment also increased, by 7,, in private utilities. The remaining sectors were responsible for nearly 4. Manufacturing jobs related to U. Most of the declines in professional and business service jobs were in the employment services category, primarily an intermediate service that includes employment placement agencies, temporary help services, and professional employer organizations.
PCE-related employment also declined by , for retail trade 4. From to , when the majority of employment declines were consumer-related, five major industry sectors were primarily responsible for the PCE-related job declines: PCE-related manufacturing jobs alone declined by , As for services, wholesale trade was particularly affected, with PCE-related employment decreasing by 8 percent , jobs.
In total, more goods-producing jobs tied to consumption were lost than service-providing jobs in This differs from , when more service-providing jobs were lost. The larger decline in goods-producing jobs in coincided with a larger decline in consumer demand for those industries than the previous year see tables 1 and 4. In six major sectors surpassed levels: Only two of those sectors actually had experienced PCE-related declines between and As for sectors that did not recover, in PCE-related wholesale trade jobs remained , jobs below levels, while PCE-related employment in retail trade had 58, fewer jobs than in Financial activities had , fewer PCE-related jobs, while manufacturing lost more than 1 million such jobs.
In comparison with the recovery from the recession, the severity of the recent recession can be observed at the major sector level. For example, both the professional and business services sector and the leisure and hospitality sector required 1 more year to recover PCE-related employment in the latest recession than in the recession.
Furthermore, PCE-related jobs in retail trade had not recovered as of —5 years after the recession began—while they required 4 years to recover from the recession. PCE-related employment by detailed industry: Table 5 shows the detailed industries with the top 10 largest and most rapid consumer-related employment declines from to All of the industries with the largest job declines were services—such as trade, finance, information services, and food services—with the exception of printing and related support activities.
Seven of the industries with the largest PCE-related declines were among the industries that also experienced the largest employment declines in the overall economy, with the exception of private households, telecommunications, and printing and related support activities. Lower consumer spending correlated with the most PCE-related job reductions in the retail trade industry, which declined by , jobs. The 10 industries with the most rapid declines in PCE-related jobs were all manufacturing industries.
Several were involved in the housing and auto markets, such as motor vehicle body and trailer manufacturing — Six of the industries with the most rapid PCE-related job declines were also among the top 10 industries with the most rapid declines in the overall economy. The remaining four industries with the most rapid job declines for the overall economy were all investment-related in the construction industry.
Note that some of the industries that shed jobs most quickly when consumer demand lessened had a low base of consumer-related employment to begin with. Table 5 also shows the detailed industries with the largest and most rapid gains in consumer-related employment during the latest recession. Industries that gained the most jobs related to consumer spending were typically in the health care or education sectors. Health care and education jobs were also among the fastest growing for both consumer-related employment and total employment.
Table 6 ranks the top 20 detailed industries that were most dependent on consumer spending in —meaning industries with the highest ratio of PCE-related jobs to total jobs—and shows how they fared during the recent recession. With the exception of beverage manufacturing, the last in the ranking, all industries most dependent on consumers were service-providing industries.
Just over half of the most consumer-dependent industries gained jobs between and , many because they are in the health care and education fields. Other heavily dependent industries with higher income elasticities of demand, such as recreation and personal services industries, experienced declines associated with lower consumer spending in the recession.
The industry composed of grantmaking, giving services, and social advocacy organizations is also heavily dependent on PCE. Most PCE in this industry comes from the final consumption expenditures of nonprofit institutions serving households. PCE-related employment grew Employment and spending growth in this industry dissipated as the weak recovery of the recession took place through and The recent recession had a notable impact on two long-run trends relating to employment and consumer spending: The percentage of PCE-related jobs in the health care and social assistance industry increased relative to other sectors during the — recession, rising from On the other hand, the percentage of PCE-related jobs in the retail industry hovered around In and , as employment began to recover in other sectors, the percentage of PCE-related jobs in the health care and social assistance sector held steady.
With aging baby boomers, however, upward employment pressure will likely continue for this industry see projections section. The recession also had an impact on the decline of PCE-related manufacturing jobs. Consumers—who support over 40 percent of all U. The same pattern exists for all manufacturing jobs in the United States. As seen in table 4, the latest recession intensified the decline of consumer-supported employment in manufacturing industries between and Yet in and , manufacturing jobs tied to consumption and the overall economy did not decline for the first time since Higher domestic demand for the products of U.
With the impact of the Great Recession on consumers and with the aging of the U. Will they continue to support the majority of U. To determine the impact of consumer spending on future economic growth, we take into consideration both the projected output of the U. BLS projects that the — recession and other factors will have an adverse effect on the U.
Consumer spending, like the total economy, is projected to experience slower growth than its prerecession rates as demographics shift and consumer behavior changes. As the baby boomers leave the labor force, their consumption is expected to decline and shift more towards services. In fact, BLS projects that A projected expansion of 1. This differs from every year time span since , during which consumer spending grew faster than did the overall economy.
The projected growth of PCE is more rapid than the 1. Consumers are projected to be responsible for With the resurgence in investment, strong growth in exports, and the changing demographics of consumers, the decades-long rise of consumer spending as a percentage of nominal GDP is expected to stabilize see figure 1.
Total employment, by expanding at an annual growth rate of 1. Over 90 percent of the new jobs are anticipated to be in services, with the remaining growth coming from the recovering construction industry. Nearly a third of job growth is projected to be in the health care and social assistance sector. Because the majority of jobs in services—which are expected to account for over 90 percent of new job growth—relate to PCE, 49 consumers are projected to remain a stable and important force in the economy through The health care and social assistance sector alone, which is projected to supply nearly a third of new jobs, is overwhelmingly dependent on consumers by definition.
The percentage of all jobs related to consumers tends to decline during times of economic expansion as investment-related employment increases in share see figure 3 ; through , however, upward pressure exists for PCE-related employment with the growth of labor-intensive, consumer-dependent industries such as health care. Between and , PCE-related employment is projected to grow 1. The PCE-related employment projected growth rate is slightly slower than, though similar to, the projected 1.
In comparison with PCE-related employment, employment related to investment is projected to grow 2. Growing faster than any other GDP component, export-related jobs are projected to increase 2.