NCPA - National Center for Policy Analysis

The Great Recession Still has Adverse Consequences

June 29, 2015

The Great Recession is associated with a dramatic weakening of the labor market from which it only recovered very slowly. The unemployment rate remained stubbornly high for several years, and durations of unemployment continue to be unprecedentedly long. The weakening of the labor market in the Great Recession was associated with tremendous job destruction and costly adjustment for those whose jobs were lost.

The estimates of the costs of job loss based on the Displaced Workers Surveys (DWS) show that displacement imposes a significant economic burden on job losers.

The first part of these costs are in the form of difficulty in finding new employment and difficulty in finding full-time employment.

  • This component of costs was particularly severe for workers losing jobs in the Great Recession, when only 50 percent of job losers reported being employed at the next DWS survey date. Almost 25 percent of those job losers who did find jobs were employed full time.
  • Even among losers of full-time jobs between 2007 and 2009, only about 52 percent were employed in January 2010 and only 80 percent of those were reemployed in a full-time job.
  • Thus, only about 35-40 percent of those in the DWS who reported losing a job from 2007-2009 period were employed full-time in January 2010.

The adverse employment experience of job losers continued beyond the Great Recession.

The second part of the cost of job loss concerns post-displacement earnings on new jobs relative to earnings on the lost job. The study shows substantial weekly earnings declines for reemployed job losers, the earnings losses were not especially large by historical standards in the Great Recession or its aftermath.

Source: Henry S. Farber, "Job Loss in the Great Recession and Its Aftermath: U.S. Evidence from the Displaced Workers Survey," National Bureau of Economic Research, May 2015.


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