Policy Brief

Is the Great Recession Really Over?

Many have argued that the Great Recession is over and that the U.S. labor market is back to where it would have been in the absence of the recession and the shocks that gave rise to it. By the end of 2015, the U.S. unemployment rate had returned to its 2007 level, below 5 percent. Yet the U. S. labor force participation rate and thus the U.S. employment rate (employment-population ratio) remained three percentage points below their 2007 levels. Only half or less of the decline is explained by demographic change. What caused the remaining decline in labor force participation? I attempt to address this question in a recent paper, “Is the Great Recession Really Over? Longitudinal Evidence of Enduring Employment Impacts”. Using micro-data on two million retail workers, I show that local variation in the employment impact of the Great Recession had enduring effects across local areas. Workers in areas that were severely hit in 2007-09 were less likely to be employed in 2014 than similar workers from less affected areas, regardless of where they lived in 2014. This enduring employment impact of a worker’s location at the onset of the Recession cannot be fully explained by nationwide skill-biased technical or trade changes.