The Great Recession's Impact on Hours Worked and Employment

Article excerpt

08.29.2012

by Dionissi Aliprantis

Employers can respond to the economy by hiring, not hiring, or firing employees, as well as by choosing the hours worked by employees. It is not immediately obvious how these choices might be related over a given time period. In an economic downturn, for example, employers might decrease the number of workers they employ and increase the hours of their remaining employees so as to decrease their costs from benefits. Or employers might choose to decrease the hours their employees work to avoid laying off or firing employees. Or employers might decrease the number of workers and the hours of those remaining simultaneously.

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To investigate the impact of the Great Recession on hours worked I retrieved Current Employment Statistics (CES) survey data from the Bureau of Labor Statistics. I began by examining trends in both the level of total private payroll employment and the average weekly hours worked by production and nonsupervisory private employees. Those data show there was a major drop in both employment and average hours worked during the Great Recession.

However, the drop relative to long-term trends is different for each of these variables. While the drop in aggregate employment appears as a deviation from a positive long-run trend, the decrease in hours during the Great Recession only seems to be an acceleration of a long-run decrease in weekly hours worked.

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Decomposing these series into sectors, we can see the well-documented growth of the U.S. service sector. Employment in the goods-producing sector has declined only relative to employment in the service-providing sector, not in the absolute number of jobs.

This means that, although there was a smaller absolute loss of jobs during the Great Recession in the goods sector relative to the service sector (3.6 million and 4.1 million jobs lost, respectively), the share of jobs lost was much greater in the goods-producing sector (16. …

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