February 26, 2021

Off the Charts: Usual Growth Leaders Absent From Recovery

Since the recession officially ended in June 2009, the number of government jobs has fallen 2.2 percent. In no other recovery since World War II has there been a decline over a similar period.

In recoveries before 1990, construction employment was always a contributor to economic growth, often a leading one. In part, that was because recessions were sometimes caused by the Federal Reserve pushing up interest rates. In an era when the rates that banks could pay on savings accounts were limited, that cut off the supply of mortgage credit. Fed easing meant that banks could lend again, and sometimes the results were explosive.

But in this recession the collapse in construction jobs came despite low interest rates. Easy credit had led to significant overbuilding, and the slump in construction employment, which began in mid-2006, has continued even after the National Bureau of Economic Research concluded that the recession was over.

Overall construction employment is down 28 percent from the peak. Before this cycle, the largest postwar decline had been 18 percent in 1974-75. That decline did not begin until the 1973-75 recession was well under way, and ended only a few months after the recession did.

The number of jobs in state and local government has declined in 21 of the last 24 months, according to seasonally adjusted figures from the Bureau of Labor Statistics, as many governments have been forced by declining tax revenue to seek savings. There was a brief blip in federal government employment because of temporary work for the 2010 census, but overall federal employment has grown at a very slow rate.

The recoveries that began in 1991 and 2001 came to be known as jobless recoveries, so being comparable to them is no great accomplishment. But over all, jobs growth during the first two years of recovery has been a little better than after the 2001 downturn, but a little worse than after the 1990-91 recession.

As can be seen from the accompanying charts, private sector employment, excluding construction jobs, has been a little better than after the two previous downturns.

To some economists, the high unemployment rate for construction workers creates an opportunity for badly needed spending on roads, bridges and schools. “The need for infrastructure spending is as great as ever, if not greater, than in the entire postwar period,” said Henry Kaufman, who runs his own advisory firm.

But that seems unlikely to happen, since current political pressure calls for reduced government spending. That pressure is also likely to lead to more layoffs in state and local governments, particularly when schools reopen in the fall. The targeted stimulus spending that might accelerate the recovery and prevent more layoffs is not on the Washington agenda.

Floyd Norris comments on finance and the economy at nytimes.com/economix.

Article source: http://feeds.nytimes.com/click.phdo?i=b352568deadd4fe77334c9a10db54a63

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