Substantial Job Losses in 2008: Weakness Broadens and Deepens across Industries: Employment Losses in 2008 Accelerated by Year's End as Continued Weakness in Construction, Manufacturing, and Professional and Business Services Spread into Consumer-Driven Industries

By Kelter, Laura A. | Monthly Labor Review, March 2009 | Go to article overview

Substantial Job Losses in 2008: Weakness Broadens and Deepens across Industries: Employment Losses in 2008 Accelerated by Year's End as Continued Weakness in Construction, Manufacturing, and Professional and Business Services Spread into Consumer-Driven Industries


Kelter, Laura A., Monthly Labor Review


As measured by the Current Employment Statistics (CES) survey, total nonfarm employment peaked at 138.2 million in December 2007, coinciding with the official start of the current recession. (1) This turning point marked the end of a nearly 3-year employment expansion totaling almost 5.4 million jobs. (See chart 1.) Job growth had slowed during 2007, and then employment fell by 3.1 million (or 2.2 percent) during 2008, with declines in most industry sectors. Furthermore, the job losses were more widespread and severe than during the previous two employment contractions.

Manufacturing, construction, financial activities, and professional and business services had begun seeing job losses or weakened employment growth in 2007, after which they experienced a worsening employment picture during 2008. Consumer-driven industries, such as retail trade and leisure and hospitality, started to cut workers in 2008, and employment declines accelerated during the last several months of the year. Only health care, mining, and government industries continued to add jobs.

Several economic issues that faced the Nation in 2008 contributed to the employment loss. Among such issues were continued housing market troubles, record-high oil and gas prices, rising costs of food, a financial crisis brought on by mortgage defaults, tightened credit, and weak retail sales.

Nonfarm job loss in perspective

Over the past three decades, the United States experienced three employment contractions. (2) Following a peak in August 1981, total nonfarm employment fell by 2.8 million through December 1982. Next, nonfarm employment fell by 1.6 million (or 1.5 percent) during the 11 months of the 1990-91 contraction. Finally, nonfarm employment reached a peak in February 2001 and then fell by 2.7 million over the next 30 months.

The current employment contraction ran through 2008 and has continued into 2009. Compared with the previous contractions, job losses in 2008 accelerated more rapidly. During the first 8 months of the year, job losses were relatively mild, averaging 137,000 per month; then, in September and October, losses accelerated to an average of 351,000 per month. A further acceleration took place during November and December, to an average of 639,000 jobs lost per month.

In 2008, the employment contraction, in terms of total nonfarm job loss, appears most similar to the employment contraction that started in July 1981. (See chart 2.) In both the 1990 and 2001 contractions, employment flattened out 10 months after its peak. In relative terms, both the 2008 contraction and the 1980 contraction saw employment fall by about 2.2 percent 12 months after the peak.

[GRAPHIC 1 OMITTED]

[GRAPHIC 2 OMITTED]

When was the last time ...?

At the same time that several industries observed employment losses which had not been experienced in decades, number of other industries set record job losses in 2008. See table 1.) Nonfarm employment fell by more than 3.0 million, the largest 12-month loss, in absolute terms, since October 1944--October 1945. During that period, losses were attributed primarily to the contraction of defense-related industries following the end of World War II. In percentage terms, the last time employment fell by more than 2.2 percent over the year occurred in 1982. Furthermore, job losses in November and December 2008 totaled 1.3 million--the largest 2-month loss of this magnitude since September and October 1945, when the Nation lost 1.9 million jobs.

Total private employment declined by 3.2 million over the 12 months ending in December 2008, the largest net loss in the history of the series, which began in 1939. The 1-month diffusion index for private nonfarm industries indicates that the scope of job loss widened in 2008. (See chart 3.) In December, the 1-month diffusion index fell to 20.5--the lowest level in the series history (beginning in 1991)--from a peak of 64. …

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