The Great Recession
The Great Recession
The Great Recession—which officially lasted from December 2007 to June 2009—began with the bursting of an 8 trillion dollar housing bubble. The resulting loss of wealth led to sharp cutbacks in consumer spending. This loss of consumption, combined with the financial market chaos triggered by the bursting of the bubble, also led to a collapse in business investment. As consumer spending and business investment dried up, massive job loss followed. In 2008 and 2009, the U.S. labor market lost 8.4 million jobs, or 6.1% of all payroll employment. This was the most dramatic employment contraction (by far) of any recession since the Great Depression. By comparison, in the deep recession that began in 1981, job loss was 3.1%, or only about half as severe.
Even after the economy stopped contracting in the summer of 2009, its growth has not been nearly strong enough to create the jobs needed simply to keep pace with normal population growth, let alone put back to work the backlog of workers who lost their jobs during the collapse. In the post-World War II recessions before the early 1990s, it took an average of 10 months for the economy to regain the jobs it had lost during the recession. But after the early 1990s recession, it took nearly two years, and after the early 2000s recession, it took over three-and-a-half years. Unfortunately, the recovery from the Great Recession is following the sluggish pattern of these last two recoveries, but likely with an even longer timeline. In October 2010, 16 months after the official end of the recession, the economy still had 5.4% fewer jobs than it did before the recession started. Thus, the Great Recession has brought the worst of both worlds: extraordinarily severe job loss, combined with an extremely sluggish recovery.
The job loss during the Great Recession has meant that family incomes have dropped, poverty has risen, and adults as well as children have lost health insurance. The bursting of the housing bubble and the drop in the stock market has meant that family wealth has dropped dramatically, as well. This feature highlights the impact of the Great Recession on the labor market and on working families.