Much of the economic and market commentary in the last month has focused on whether the economy is entering a recession. Specifically, how severe or long a possible recession could be and what that may mean for jobs. We cannot say for certain how any future economic slowdown would impact the current labor market, but we can map out what has occurred to jobs in prior recessions.
Looking back at 1990, the Household Survey peaked in March, four months prior to the start of the recession. In July 1990, the official beginning of the recession, the HH Survey still added 1.34 million more jobs versus the prior year, but the pace had been slowing since March 1989. The y/y comparison did not go negative until the last three months of the recession. From January 1991 through December 1991, the HH Survey failed to see positive y/y growth despite the recession having officially ended in March 1991. From peak to trough, the number of employed persons dropped by 1.76 million and did not recover to its pre-recession level until February 1993.
Source: Macrobond.
Total nonfarm payrolls (NFPs) from the Establishment Survey peaked one month prior to the official start of the recession, bottomed in May 1991, and did not recover until February 1993. NFPs had negative y/y growth from January 1991 through March 1992 – fifteen months of y/y slowing that began in the last three months of the 1990 recession.
Source: Macrobond.
Initial jobless claims rose from 282,000 in Q1 1989 to 393,000 when the recession began in Q3 1990. By the end of the recession, jobless claims hit 483,000 in the first part of Q1 1991 and peaked at the end of Q1 1991 at 509,000. Jobless claims did not get back to their pre-recession level until Q4 1992. Continuing jobless claims, a measure that can be used to gauge ongoing labor market friction, increased by 1.01 million to 3.50 million at the end of the recession. However, continuing claims did not reach their pre-recession level until Q1 1995.
Source: Macrobond.
Turning to the 2001 recession, the HH survey peaked in January at 137.78 million (two months prior to the official recession) and bottomed in January 2002 at 135.70 million (two months after the end of the recession). The number of employed persons did not fully recover until June 2003, nineteen months after the official end of the recession.
Total nonfarm payrolls peaked in February 2001 at 132.79 million (one month prior to the official recession) and bottomed in August 2003 at 130.15 million (nearly two full years after the official end of the recession). From July 2001 through November 2003, NFPs had negative y/y growth and did not recover to pre-recession levels until February 2005.
Source: Macrobond.
Source: Macrobond.
Initial jobless claims rose from 259,000 in Q2 2000 to 386,000 at the start of the recession in Q1 2001. The tally jumped to 517,000 by the end of the recession in 3Q 2001. Jobless claims remained above the low in Q2 2000 until 2016, but did get back below the Q1 2001 level in Q2 2002. Continuing claims increased by 1.06 million from the official start and end dates of the 2001 recession. The pre-recession low in Q2 2000 was 1.96 million and the series peaked in November 2001 at 3.79 million, a 1.83 million increase. This measure remained above 3 million until Q1 2004 and did not recover to pre-recession levels until Q1 2006.
Source: Macrobond.
Looking at a more severe recession, the Great Financial Crisis had a devastating impact on the labor market. The HH Survey peaked in November 2007 at 146.60 million and reached 138.01 million by December 2009 (seven months after the official end of the recession). The decrease of 8.59 million employed persons as reported by the HH Survey did not recover until July 2014, sixty-two months after the official end of the recession. From June 2008 through August 2010, the HH Survey had negative y/y growth, a full twenty-nine months of slowing labor.
Source: Macrobond.
NFPs peaked in December 2007 at 138.39 million and bottomed at 129.70 million after shedding an additional 1.7 million jobs from the official end of the recession to the trough in February 2010. From May 2008 through August 2010, NFPs posted negative y/y growth and failed to recover until May 2014.
Source: Macrobond.
Initial jobless claims moved from 296,000 in Q1 2007 to 352,000 at the start of the recession in Q4 2007. At their peak, jobless claims hit 665,000 in Q1 2009. They did not get back to pre-recession levels until the end of 2012. Continuing claims increased by 3.48 million over the eighteen months marked as the GFC. They remained above 3 million until Q2 2013 and moved below their pre-recession level in 2Q 2014.
Source: Macrobond.
In the latest round of releases, the HH Survey for employed persons slowed versus last month’s y/y pace for the third consecutive month. Total nonfarm payrolls increased by 528,000 in the month of July, its third m/m acceleration in a row. Coming in at 262,000, initial jobless claims have been trending higher since March. Continuing claims are still below 1.5 million, but have not moved below their May low from thirteen weeks ago. However, as the recessions highlighted above demonstrate, payroll data typically peaks at the beginning of recessions and claims peak toward the end of recessions.
Source: Macrobond.
The table below compares the depth and length of time to recovery across the different recessions and labor market metrics discussed in this post.
Source: Macrobond.
The views expressed herein are presented for informational purposes only and are not intended as a recommendation to invest in any particular asset class or security or as a promise of future performance. The information, opinions, and views contained herein are current only as of the date hereof and are subject to change at any time without prior notice.
Senior Economic Analyst
Boyd Watterson Asset Management, LLC
