Economic Research and Data

Economic Trends

Filling you in on the current state of the economy

Employment during the Recovery

As business cycles go from expansions to recessions, employment and production mirror their trends, increasing during expansions and decreasing during recessions at roughly the same rates.

In terms of production growth, the current expansion (2001–07) has been fairly typical. Measured by GDP, the trough of the business cycle was not as deep as normal; in fact, it barely scraped the upper bound of the average range. The recovery phase for 2001–07 is within the average range, but falls below average growth after eight months.

In contrast, employment during the recovery has been far from normal. It got off to a good start at the peak of the expansion, and was still ahead of the curve at the trough in 2001. After 15 months, though, employment failed to pick up as fast as it should have. Because it stayed relatively flat for an extended period of time, employment took 45 months to regain its pre-recession level.

The glaring difference between nonfarm employment for 2001–07 and the average employment growth after a recession cannot be explained by an atypical recession or recovery; real GDP stayed within normal bounds throughout the cycle. Nor can it be explained by the unusually large benchmark revisions in nonfarm employment for April 2005 through March 2006 (seasonally adjusted from 2002 onward) from the BLS; even the upwardly revised data show employment far below ordinary levels. Thus, the current expansion remains a “jobless recovery.”

Economic Trends is published by the Research Department of the Federal Reserve Bank of Cleveland.

Views stated in Economic Trends are those of individuals in the Research Department and not necessarily those of the Federal Reserve Bank of Cleveland or of the Board of Governors of the Federal Reserve System. Materials may be reprinted provided that the source is credited.

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