In the depths of the recession, from October 2008 to April 2009, around 700,000 people lost their jobs every month. Many of these workers remained jobless for long stretches of time, as this downturn produced the highest levels of long-term unemployment in six decades. Yet even those who found new jobs relatively quickly have experienced lasting setbacks. Two years after losing their jobs, workers who are reemployed are earning 17% less than they previously made, according to a new analysis by the Brookings Institution’s Hamilton Project. The lost income averages about $600 per month.
It’s been well documented that low-skilled workers were more likely to lose their jobs during the recession than those with higher levels of education. The current unemployment rate is 14.0% for workers without a high school degree, 9.7% for those with only a high school degree, and 4.2% for those with a college degree. A new analysis by the Urban Institute identifies the states where low-skilled workers (those with less than a high school degree) were hit hardest by the recession in comparison to other groups: Tennessee, Virginia, Massachusetts, Oregon, and Arizona.
After the stock and housing markets bottomed out three years ago, many older Americans saw their nest eggs disappear and had to delay their plans to retire. Or at least that’s the story that news outlets have been reporting for a while. New data show, however, that a larger share (17%) of individuals over age 62 retired between 2008 and 2010 than during any other two year period in the past decade.
Last night, President Obama presented the American people and a joint session of Congress with his plan for tackling unemployment and spurring economic growth. He repeatedly exhorted Congress to pass his package, The American Jobs Act, “right away.” Should they? Here’s a look at the main components of his plan and whether or not they’re likely to help create jobs…
In anticipation of President Obama’s major jobs speech tonight, I’m focusing my posts this week on unemployment and what we can do to address it. Earlier I gave an overview of the situation in 10 Essential Facts About Our Unemployment Crisis. In today’s post, I try to understand where exactly the problem lies.
The recession officially ended in mid-2009 when we halted our economic freefall and slowly started to turn the ship around. But the recovery has progressed more sluggishly than people imagined it would – and slower than previous recoveries – and unemployment still stands at 9.1%. With the recession officially over for two years now, what is holding back employment from returning to pre-recession levels?
There was little economic news for American workers to celebrate this Labor Day, given the dismal employment statistics released by the Bureau of Labor Statistics on Friday. This Thursday night, President Obama will respond with a major speech on his plans to improve the economy and specifically to boost job growth. With that in mind, I’ve decided to focus my posts this week on jobs and unemployment. To start off, here are 10 key facts you should know about our current unemployment crisis…
Why have some states, like Texas and North Dakota, weathered the recession much better than others, like Arizona and Florida? According to new report from Goldman Sachs (not available online but summarized here and here), three key factors protected certain states from the worst of the recession:
- energy resources or industries, particularly oil and natural gas
- technology and high-end professional industries
- fewer subprime mortgages during the housing bubble
These three factors explain nearly three-fourths of the difference in job performance among states since the recession began.
What didn’t matter? States’ tax and spending policies. Goldman’s research found that the size of a state’s spending and its income and property tax rates had no relationship with that state’s job picture. Whether other government activities, like regulatory structures or investment in job development programs matter wasn’t covered in any descriptions of the report I read.
These findings should give pause to those who argue that tax and spending policies, in and of themselves, are responsible for recent job trends at the state level. Two recent examples of this line of thinking: (1) the Rick Perry campaign’s claim that miracle job growth in Texas is due in part to tax cuts and spending reductions (2) the Heritage Foundation’s suggestion that poor job growth Illinois is due to its plan to increase tax rates. The Goldman report suggests that focusing on strengthening the housing and mortgage markets and cultivating key industries may be more valuable for states than tinkering with taxes and spending.
“For every member of the millennial generation frustrated that she can’t start a career, there may be a baby boomer frustrated that he can’t end one.”
Writing in the National Journal, Ronald Brownstein explores an interesting dynamic of the recession: young adults are facing devastating unemployment rates while older worker have barely been affected.
The employment rate among older Americans (55+) is almost exactly what it was before the recession (see the graph below). The main cause: many older workers saw their retirement savings evaporate during the crisis and aren’t ready to leave the work force yet. Meanwhile, the recession hit young adults harder than any other age group, in part because of the decrease in job openings made available by older people leaving the work force.
Some unemployed young adults are using this down time to increase their education and skills base. But Brownstein says we’ve also seen a concerning increase in “idleness” – young people who are neither working nor in school. Workers of all ages, if they want to receive Social Security checks and other benefits in the future, have an interest in ensuring young adults get off into working life on the right foot.
“Upside Down: Why millennials can’t start their careers and baby boomers can’t end theirs.”
National Journal // Ronald Brownstein // June 9, 2011
How do we teach economics students about one of the most fascinating case studies in our recent economic history and one they can probably relate to personally? Hoover Institution fellow John B. Taylor, a well-known economist who teaches at Stanford, has some ideas on how the recent crisis can be used to teach economic theory. As Taylor points out, the history of the recession is still being written so professors will have different views on what lessons it holds. He offers a few of his own in the form of slides from a recent talk he gave on the topic.
Two graphs I found particularly interesting:
The first graph shows the failure of increases in personal income due to the stimulus to increase spending on personal consumption. This data supports Milton Friedman’s personal income hypothesis (PIH) that people make their consumption decisions based on their long-term income expectations, and short-term changes in income (like tax rebates and other temporary stimulus measures) don’t have much of an impact on consumer spending. The second graph shows how targeted incentives – like the “Cash for Clunkers” program that offset the cost of newer, more fuel-efficient vehicles for people who traded in their old cars – can bend the PIH and increase personal consumption spending.
You can find more on Taylor’s blog.
Lessons From the Financial Crisis For Teaching Economics
John B. Taylor // Hoover Institution // June 6, 2011