This Has Been An Equal Opportunity Recession When It Comes To Job Losses Across Industries
This Has Been An Equal Opportunity Recession When It Comes To Job Losses Across Industries
Our guest blogger is Heather Boushey, Senior Economist at the Center for American Progress Action Fund.
Economist Paul Krugman highlights Raghuram Rajan arguing in today’s Financial Times that the Federal Reserve should begin raising interest rates because “the US had far too much productive capacity devoted to houses and cars, because consumers could obtain financing for them easily.” Essentially, Rajan is arguing that monetary tightening is necessary to shift resources out of the too-large housing and car sectors. Krugman points out that this makes no sense because most of the job losses during the Great Recession haven’t been in the construction sector:
OK, I actually haven’t taken cars into account; someone with more time can do that. But let’s look at the role of job losses in construction versus other sectors, since December 2007. It looks like this:
If high unemployment were largely about shifting workers out of an overblown construction sector, wouldn’t you expect job losses to be concentrated in that sector? Wouldn’t you expect employment elsewhere to be, if anything, rising? In fact, however, the vast majority of job losses have occurred in parts of the economy with little direct connection to the housing bubble. Yes, as a percentage job losses have been much larger in construction; but nothing in Rajan’s argument explains why we shouldn’t be using policy in an attempt to prevent vast job losses in parts of the economy that aren’t overblown.
Let me add a bit more meat to this story. In fact, the Great Recession has been more of an “equal opportunity” recession than other recent recessions (click here for a larger image):
Certainly, construction has lost a significant chunk of jobs, but other industries — manufacturing, professional and business services, transportation and warehousing, financial activities, leisure and hospitality, and information services — have all lost a larger share. Much of financial activities could be considered tied to the run-up and bust of the housing market, but all the others? This Great Recession has had fairly broad, widespread job losses across industry, which contradicts the idea that there’s one or two sectors that U.S. workers need to transition out of.
12 Responses to “This Has Been An Equal Opportunity Recession When It Comes To Job Losses Across Industries”
Register
RSSLogin
Wonk Room Tweets
Topic Cloud
ArchivesBlog RollAbout Wonk RoomContact Us
Donate
Do my eyes deceive me, or am I seeing that the category of Government has done pretty daggone well recently? Is that the sector that should be having jobs transitioned out of?
July 29th, 2010 at 9:37 pmWhat is really striking in this graph is the large change in manufacturing (-20.4%) and professional and business services (-15.2%). These are the two sectors which have been hit the hardest by the movement of operations to countries where labor is cheaper, e.g. China (manufacturing), India (IT, basic legal, call centers), Brazil (IT), as well as the Northern Mariana Islands, Mexico, Vietnam, Indonesia, and the Philippines, among others. (In the previous recession in 2001, there wasn’t the kind of connectivity in terms of fast Internet connections and VOIP in many of these countries, so outsourcing was not as practical.) Some of this change is undoubtedly due to increased automation in the workplace, too.
However, it seems that this recession has greatly sped up the processes of overseas outsourcing and automation, so that even when consumer demand for products and services returns, these jobs are not coming back. In fact, there will likely be a significant increase in the types of jobs which are outsourced: more legal services, graphic design, accounting, consulting, analysis of mammograms and other digital imaging, administrative work in the health care industry, translation, follow up calls to patients from nurses, production work for animated films, and so on, as infrastructure, education, and training improve overseas.
July 29th, 2010 at 9:59 pmThe graph is supposed to show that most of the job losses during the Great Recession haven’t been in the construction sector. Consider this.
Certain amount of goods produced is used in construction and certain amounts of services is related to construction. Arguably, they are: Trade, transportation, and utilities, Financial activities services, and Professional and business services.
BLS tables show that 53% of all job losses since 2007 are in the goods + construction category (16% in construction) and 37% in the construction related services. Those categories account for about 12% of all jobs, but whopping 90% of all job losses.
True, not all the goods-producing job losses are related to construction, and neither are all the related services job losses. But still, 12% of all jobs accounting for 90% of job losses? I would suspect that construction might have something to do with it.
July 29th, 2010 at 10:21 pmAhhh Globalization…
July 30th, 2010 at 12:20 amYou made some sort of mistake in the data. I pointed out commenting on PK’s chart that the in 2007 there was at most 8Million construction jobs, and that his chart indicates a 2M job loss, that’s 25% — so your 5.6% figure is, well, wrong. Furthermore there was about 22M manufacturing (goods), which lost 4M — far less than the 20% you have on your chart.
Take another look at the data: ftp://ftp.bls.gov/pub/suppl/empsit.ceseeb1.txt , that’s the employment levels, and use PK’s loss data.
It’s absolutely not an unusually broad-based jobloss. I also made the point that Construction jobs are remarkably often “black money” — and the losses don’t go on the books, whereas goods and services are more likely to be actually reported, and thus affected by the loss of consumers by laid-off black and legitimate construction workers.
Just saying…
July 30th, 2010 at 5:11 amHow about that manufacturing?
July 30th, 2010 at 7:34 amManufacturing AND services (professional, information, leisure) stick out. Sure, automation and Prrkinson’s Law in reverse, but reflects a general slowdown and deleveraging. However, some jobs are not coming back, and balance of trade leaves much to be desired. Move over, Japan.
July 30th, 2010 at 1:52 pmI believe you’re reading it wrong. The -5.9% for construction does not mean that we lost 5.9% of construction jobs. It means that 5.9% of the jobs lost were in construction.
July 30th, 2010 at 11:53 pmI agree that this doesn’t look right. You should double check the numbers.
Construction only down 5.9%? From when to when? That should have been your first clue that something was wrong. If this is suppose to be the percent change since the recession began (Dec 2007) to the latest data (Jun 2010), then the construction decline should be 25.5% (1.9 million jobs) using the seasonally adjusted CES data. But construction employment actually peaked well before the recession began — in August 2006. The decline since that peak has been 27.7% or 2.1 million jobs.
The other industries look off too. Starting from Dec 2007, manufacturing is down down 15% (2.1 million jobs). And professional & business services is down 7.4% (1.3 million jobs) – a lot of the decline is in temporary help agencies. Retail trade is down 7.3% (1.1 million jobs). Education & Health Services is up 5.2%. Government is up just 1.8% and that is still with some temporary census workers, so the on-going increase is even less.
July 30th, 2010 at 11:57 pmNorjl, I don’t think that is right. If this were a chart of the share of job losses, then what does the total non-farm figure of -5.2% mean? Shouldn’t that be 100%?
And even if they were going for the share of jobs lost, the numbers are still wrong. From December 2007 to June 2010, the US has lost 7.5 million jobs. In construction, we lost 1.9 million which would make it 25.5% of all jobs lost.
July 31st, 2010 at 12:04 amSomething is way off about this chart. From December 2007 to June 2009 construction alone lost 1.9 million jobs, which was about 25 percent of the original jobs in that sector and also about 25 percent of total jobs lost in the recession. You can add in that there are many housing-related jobs in construction and finance. These are very basic easy numbers to get.
July 31st, 2010 at 10:15 amwhoops, should have said there are many housing-related jobs in manufacturing and finance (more finance than manufacturing, but there are some jobs in home furnishings and appliances, etc. that are related to home sales).
July 31st, 2010 at 10:16 am