In the past three decades, the American economy has experienced largeswings in performance, over shorter and longer time periods, and has undergone majorstructural changes.During the 1980s, we first endured a severe recession, engineered by theFederal Reserve Bank to fight high rates of inflation, and then recovered with a lengthyperiod of expansion and economic growth. Another and milder recession in the early1990s was followed by an even more robust period of expansion, often call
ed the “GreatBoom” or the “Roaring Nineties,” during which high productivity and income growth
returned to the U.S. economy. But in the decade of the 2000s, which once again beganwith a mild recession, the economic picture was more mixed; a shorter period of recovery, during which productivity growth was high but income growth was muchlower, was followed by the most severe economic downturn since the 1930s, which is
commonly known as the “Great Recession
How did all of these economic forces play out in the U.S. labor marketduring this time period? In each economic cycle, how did trends in wages, employmentand annual earnings reflect these economic developments? Which groups of workersbenefited from economic growth, and which did not? Despite the periodic ups and downsin the economy, what long-term trends do we find in the labor market? And does thecurrent severe downturn, from which our recovery will likely be painfully slow, changeour long-term perceptions?We will use data from the Current Population Surveys for over 30 years toanswer these questions. The analysis will proceed in two parts. First, we consider seculartrends in labor market outcomes over the four years that constitute labor market peaksduring this time period: 1979, 1989, 2000 and 2007. We measure trends in hourly wagesand annual earnings (both adjusted for inflation) as well as employment rates across theseyears, considering how these vary by gender and educational group as well as otherdemographic traits, and also how they vary over the earnings distribution. We also look atthe changing occupation and industrial distribution of American jobs, to get more of asense of the structural forces associated with the labor market outcomes we observed.Second, we will consider peak-to-trough changes in unemployment rates,unemployment durations, and the percentages of the unemployed enduring lengthy spellsof unemployment during each of the four recessions: 1979-82, 1989-92, 2000-03 and2007-10.
This will indicate the extent to which the current downturn is similar to that of 1979-82 and the other milder ones, and might also suggest what an incipient recovery
We use annual unemployment rates to measure labor market peaks and troughs in the business cycle.These tend to lag behind the dates of peaks and troughs as measured by changes in real gross domesticproduct (GDP) and the beginning and end dates of recessions as determined by the National Bureau of Economic Research (NBER).