With the recession now over, according to most economists, the question becomes: “How long will it take to recover all the jobs lost?” Observing the employment patterns of the past few recoveries can provide some insight into job growth in the current recovery.
We need to look at how long and to what degree employment changed in the Richmond area for each of the past four recessions.
We start where peak employment stood at the onset of the recession and then look at the number of months and the percentage loss of employment until it hit bottom, called the trough. Eventually, more jobs are created and employment starts to increase. What’s key is how long it takes before employment increases to its pre-recession level.
Looking to the past recessions may give us a clue as to where employment recovery may take hold after the 2008 recession, which began in December 2007 and many believe ended in July 2009.
During the 2001 recession, for example, employment dropped 1.9 percent over 23 months. Yet it took nine months before employment rebounded 2 percent — to the pre-recession level. That was the quickest rebound among the past four recessions. The 2001 recession started in March and ended in November of that year.
The largest percentage employment decline among the past four recessions in the Richmond area came during the 2008 recession, falling 4.5 percent.
The 1990 recession, from July 1990 to March 1991, saw a 3.2 percent decline in employment — and it took the longest to regain jobs. That recession hit Richmond and the state particularly hard because of cuts in defense spending and overbuilding in the office sector.
The tendency for state and local government employment to lag during recoveries probably contributes to the relatively long employment rebounds in the Richmond area.
One could argue that the 1990 recovery provides the most-likely trajectory for the 2008 recovery. Both of those recoveries were associated with more headwinds than in the aftermath of the 2001 and 1980 recessions. The 1980 recession is the period that first started in January 1980 to July 1980 and then again from July 1981 to November 1982.
The post-1990 recession economy was still struggling under the savings and loan collapse of the prior decade, an overbuilt office sector and cuts in defense spending. Technological advances, such as computers and bar codes, to name a few, were more fully implemented to save costs during the recession, which also led to higher productivity but slower job growth coming out of the recession.
Similarly, the recovery beginning in mid-2009 continues to struggle under the weight of the finance-sector implosion, foreclosures in housing, pressure on commercial real estate and a national double-digit unemployment rate.
Also, the 8.1 percent annualized rise in productivity in the nation for the third quarter suggests technology gains will temper the need to add employees at a rapid pace during the recovery.
Time will tell how long it will take.
Reprinted with permission from the Richmond Times-Dispatch.