QWES Wage Supplement

Employment shrinks as recovery remains elusive

Job losses unusually large for women and those with higher levels of education

by Jared Bernstein

During a recession or a jobless recovery, when the economy is generating too little job growth, the number of people coming into the labor force can slow, as some individuals decide not to compete for scarce job openings. This is what has happened in recent months, as current labor force growth is about half of what it was just a few years ago.1 During such times, the unemployment rate may be less useful as a measure of the true state of the labor market, since it counts as jobless only those who are actively looking for work.

One way to avoid this problem is to examine the share of the population employed-the employment rate. Under the above scenario, even if unemployment rises less than might be expected, the employment rate will fall, since a smaller share of the population is working. By examining the employment rates of various groups we can learn more about demand for workers with those attributes.

Table 1 shows employment rates for various age groups, by gender and education. We compare the effects of this current downturn to the last one by measuring changes in employment rates over similar periods in the business cycle. The two tables that follow, which compare the average of the first three quarters of 1989 and 1991 with that same time period of 2000 and 2002, present some interesting differences. Primary among them is the relatively greater negative impact that this current downturn has had on two groups’ employment rates: women and those with at least some college education.

Table 1: Employment Rates, 1989-91 and 2000-02   A: Employment Rates, All Persons, 16+, by Gender               All Men Women     1989q1-q3 62.9% 72.5% 54.1%     1991q1-q3 61.7% 70.5% 53.6%       -1.2 -2.0 -0.5     2000q1-q3 64.5% 71.9% 57.7%     2002q1-q3 62.8% 69.6% 56.4%       -1.7 -2.2 -1.3                 B: Employment Rates by Education Level and Gender, Age 25 and Older             All Less Than High School High School Some College College or More College or More, 25-35 1989q1-q3 38.7% 63.9% 72.6% 79.8% 87.7% 1991q1-q3 37.6% 62.6% 71.5% 78.9% 86.7% Change -1.1 -1.3 -1.1 -0.9 -1.0 2000q1-q3 40.5% 62.4% 72.0% 78.3% 87.6% 2002q1-q3 40.3% 60.9% 70.0% 76.4% 85.5% Change -0.3 -1.5 -2.1 -1.8 -2.2             Men Less Than High School High School Some College College or More College or More, 25-35 1989q1-q3 51.1% 76.3% 81.7% 86.6% 94.2% 1991q1-q3 49.4% 73.9% 80.0% 84.8% 92.5% Change -1.6 -2.4 -1.7 -1.8 -1.7 2000q1-q3 52.3% 72.6% 78.9% 83.3% 94.1% 2002q1-q3 51.8% 70.6% 76.8% 81.6% 92.2% Change -0.5 -2.1 -2.1 -1.7 -1.9             Women Less Than High School High School Some College College or More College or More, 25-35 1989q1-q3 27.8% 54.5% 64.6% 71.5% 80.9% 1991q1-q3 27.0% 53.8% 64.1% 71.9% 81.1% Change -0.7 -0.7 -0.5 0.3 0.2 2000q1-q3 30.0% 53.8% 66.1% 72.9% 81.8% 2002q1-q3 29.5% 52.6% 64.2% 71.1% 79.7% Change -0.5 -1.2 -1.9 -1.9 -2.1             Note: Data are averages over first three quarters. Sources: Panel A, BLS; Panel B, EPI analysis of CPS data.

The top panel shows that for those 16 and older, overall employment rates fell half-a-percentage point more during this downturn than in the last one, a decrease of 1.7 percentage points compared to 1.2. This may be surprising to those who believe this recession has been milder than the last one. But this observation is often based on the fact that unemployment did not increase to as high a level in this downturn, revealing the need to consider employment rates as well.

The larger drop in employment has been driven almost exclusively by women, whose employment rates fell almost a point more in this recession than in the last. Part of this decline corresponds to the difference in job losses by sector between this and prior downturns. For example, since the recession began, service employment has expanded by only 1%, compared to 2.6% over the same number of months in the last recession.2 Temp work has also fallen off much more quickly in this recession.

The other panels in the table focus on employment rates by education level and gender for those 25 and older. Interestingly, the employment declines among those with a high school education or less are smaller in this recession than they are for those with more education. For example, the percentage-point decline in employment rates for those with some college since 2000 was -2.1, and for college graduates, -1.8. For high-school graduates, the decline was -1.5 and dropouts’ rates fell the least, -0.3 percentage point.3 This pattern also differs from the recession of the early 1990s, when employment losses were more evenly experienced by each education group.4

Employment rate declines for 2000-02 have been broadly similar by gender, except for male high school graduates, whose employment loss was larger. But this similarity stands in direct contrast to the female trend over the 1989-91 period, when losses were larger for men. This is especially true among those with at least some college. In the early 1990s, employment rates fell slightly for women with some college (-0.5 points) and rose slightly for college graduates (0.3 points). Yet in the current period, employment rates are down by nearly 2 percentage points for both groups of women.

Clearly, employment losses have been widely felt throughout the economy. Workers whose higher skill levels formerly protected them from market swings have proven to be vulnerable to job loss in this recession. Part of this trend surely relates to various events that have hurt industries with higher-skilled employees, such as the bursting of the “dot.com” bubble. Corporate scandals and various related bankruptcies have also played a role in distributing the pain of recession more broadly in this downturn as well as in the current slow growth recovery.

For the most recent college graduates, these difficulties are contributing factors in a particularly tough job market. Table 1 shows that among 25 to 35-year-old college graduates employment rates fell slightly more than among all college grads. Figure 1 shows the trend in their employment rates, as well as those of all college grads, 25 and up.5 For all college grads, employment rates are at a two-decade low, with the decline persisting throughout the current jobless recovery. While the recent decline is evident in both this and the last recession, the drop for young college graduates is particularly steep. Since the early years of a career are key in setting the future trajectory of these young men and women, this sharp contraction of employment rates for highly educated workers exposes a serious problem in the current labor market.

Figure 1


1. See EPI’s monthly employment analysis at http://epi86dev.wpengine.com/content.cfm/webfeatures_econindicators_jobspict .

2. In the recession of the early 1980s, service employment was up 7% over the comparable period, and female employment rates were up slightly as well, by 0.7 percentage points.

3. Note that the overall decline in dropout employment rates was smaller than that of both men and women. This is explained by the fact that male dropouts, whose employment rates are higher than women’s, increased as a share of total dropouts over the perio

4. Both of these cases differ from the pattern in early 1980s recession, wherein the largest declines were experienced by those with the least education. For example, using the same sample and time frame as in the table (1979-81), employment rates fell 2.5 points for dropouts and grew 0.9 points for college grads.

5. The data in the figure represent the underlying trend in the data. See http://epi86dev.wpengine.com/content.cfm/qwes_2000-4_qwes2000-4 for discussion of trend-extraction methods.

For more information, see the data appendix.

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