Jobs: More Slowly Created, More Slowly Destroyed

Abstract

Employment can swing widely during economic expansions and contractions. During the most recent recession, the total number of jobs fell by about 5.5 percent, a drop of roughly 7.6 million jobs. 1 The economy has improved substantially since the downturn, and in 2015 the total number of jobs has surpassed pre-recession lev els. At the industry level, the recovery from this recession has been far from balanced. Certain industries experi enced strong recoveries, while others still remain below their prerecession highs. In particular, the bulk of employment gains were concentrated in the professional business services, leisure and hospitality, and education and health services industries with increases of roughly 6, 10, and 15 percent, respectively. Numerous job losses occurred in the con struc tion, manufacturing, and information industries with declines of 20, 12, and 9 percent, respectively. 2 These rates reflect net employment changes for the dif ferent industries. However, more than 7 million jobs are created and almost as many are destroyed in the U.S. economy every quarter . 3 During recessions, fewer jobs are created and more are destroyed, leading to a net drop in total employment. During expansions, the opposite hap pens and more jobs are created than destroyed. The large magnitudes of job creation and destruction highlight the dynamism of the U.S. labor market and the pace at which resources are reallocated to alternative—presumably better—uses. The accompanying figure shows the pace of job cre ation and destruction relative to employment for a select ed group of industries with the largest net job gains and loss es in the most recent downturn and subsequent recovery. The series are interpreted as the number of jobs created or destroyed in a quarter relative to the total number of jobs at the end of the quarter. For example, on average, 4.2 per cent of manufacturing jobs are created and 4.6 percent are destroyed each quarter. With the exception of education and health services, all industries destroy more jobs than they create during recessions (denoted by the shaded bars in the graphs). Despite the large cyclical swings in net employment and gross job destruction and creation rates, most industries share a common feature: The rate of job creation and destruction has been falling. In other words, all the graphs exhibit a common downward trend. This reduced dynamism in the labor market is consistent with more stable and longer-lasting employment relationships, given that fewer jobs are being destroyed. However, it is also consistent with a longer duration of joblessness and less job switching, as fewer jobs are being created.