Meet the Author

Yoonsoo Lee |

Research Economist

Yoonsoo Lee

Yoonsoo Lee was formerly a research economist in the Research Department. His areas of research include macroeconomics, labor economics, and regional economics.

Meet the Author

Beth Mowry |

Research Assistant

Beth Mowry

Beth Mowry was formerly a research assistant in the Research Department of the Federal Reserve Bank of Cleveland. Her work focuses on labor markets and business cycles.


Economic Trends

December Employment Situation

Yoonsoo Lee and Beth Mowry

December employment fell by 524,000, roughly meeting expectations and bringing the year’s total losses to 2.6 million. Downward revisions to both October and November figures leave those months’ losses at 423,000 and 584,000, respectively. The revised numbers for October and November, coupled with December’s newly reported losses, reveal fourth–quarter 2008 declines exceeding 1.5 million jobs. The unemployment rate also jumped 0.4 percentage point from 6.8 to 7.2 percent in December, the highest rate since January 1993. The number of unemployed rose by 632,000, even as the labor force contracted by 173,000. Unemployment rates for the prior two months were also revised higher, to 6.6 percent in October and 6.8 percent in November.

The diffusion index of employment change also sank a little further from 27.2 to an unprecedented low of 25.4, meaning that only about one–quarter of industries are expanding, while the rest are trimming positions.

Job losses were about evenly split between the goods–producing sector (251,000) and the service–providing sector (273,000). Within the goods sector, onstruction lost 101,000 jobs and anufacturing lost 149,000. Residential construction losses (54,000) were heavier than nonresidential losses (34,000). The greatest manufacturing declines were seen in durable goods (−114), particularly within the motor vehicles and parts and fabricated metal products. Nondurable goods shed 35,000 jobs, with food manufacturing suffering the heaviest casualties.

Last month’s service–sector payroll loss of 273,000 follows November’s even larger loss of 402,000, larger than any loss experienced since August of 1983. Total net losses in the sector this year now total over 1.2 million. The biggest service–sector losers last month were trade, transportation and utilities (−121,000) and professional and business services (−113,000). Auto dealers alone accounted for about one–third of retail trade’s 67,000 payroll cuts. The drop–off in professional and business services this year has been uncharacteristically steep, even in comparison to past recessions. Also within services, information lost 20,000 jobs and financial activities lost 14,000. Declines last month in Leisure and hospitality (22,000) slowed down a bit from the previous few months. The only bright spots in the report, as usual, were in education and health (which gained 45,000) and government (which gained 7,000).

Labor Market Conditions

  Average monthly change
(thousands of employees, NAICS)





Payroll Employment 175 91 −216 −524
Goods-producing 3 −38 −113 −251
Construction 13 −19 −53 −101
Heavy and civil engineering 3 −1 −7 −12.6
Residentiala −5 −20 −31 −53.6
Nonresidentialb 14 1 −15 −34.3
Manufacturing −14 −22 −66 −149
Durable goods −4 −16 −50 −114
Nondurable goods −10 −6 −16 −35
Service-providing 172 130 −102 −273
Retail trade 5 6 −44 −66.6
Financial activitiesc 9 −9 −12 −14
PBSd 46 26 −57 −113
Temporary help services 1 −7 −41 −80.9
Education and health services 39 44 45 45
Leisure and hospitality 32 29 −14 −22
Government 16 21 15 7
Local educational services 6 5 2 2.2
Civilian unemployment rate 4.6 4.6 5.8 7.2

a. Includes construction of residential buildings and residential specialty trade contractors.
b. Includes construction of nonresidential buildings and nonresidential specialty trade contractors.
c. Financial activities include the finance, insurance, and real estate sector and the rental and leasing sector.
d. PBS is professional business services (professional, scientific, and technical services, management of companies and enterprises, administrative and support, and waste management and remediation services).
Source: Bureau of Labor Statistics.

The three–month moving average of private–sector employment growth dropped to an almost unprecedented low of −516,600 last month. Greater losses were seen only back in February 1975, five recessions ago.