Monthly Labor Review February 2002 3

U.S. labor market in 2001:

economy enters a recession

U.S. labor market in 2001

Title

The year began with a weakening labor

market, in which manufacturing’s downturn

spread into other sectors; unemployment climbed

from the historic lows reached

during the recent economic expansion

David S. Langdon,

Terence M.

McMenamin,

and

Thomas J. Krolik

David S. Langdon is an

economist in the Division of Current Employment Statistics, Terence

M. McMenamin is an

economist in the Division of Labor Force Statistics, and Thomas J.

Krolik is an economist in

the Division of Local

Area Unemployment

Statistics, Bureau of Labor Statistics.

e-mail:

langdon_d@bls.gov;

mcmenamin_t@bls.gov;

and

krolik_t@bls.gov

The Nation’s longest postwar expansion

ended in 2001, as the U.S. economy entered

a recession in March 2001, after an unprecedented 10 years of growth.1 Manufacturing’s

downturn started in late summer of 2000 and deepened in 2001, as businesses sharply reduced spending on machinery, computers, and other capital

goods. However, retail sales and the housing market, both of which tend to be highly cyclical, held

steady throughout most 2001. Consumers’ steadfastness did waver in the fourth quarter, as rising

unemployment coupled with the psychological and

economic effects of the tragic events of September

11 depressed consumer confidence.2

Nonfarm payroll employment fell 762,000, or

0.6 percent, in 2001. (See table 1.) Falling orders

led factories to cut more than 1 million jobs from

their payrolls. This retrenchment led to job losses

in wholesale trade and transportation, and to a

massive cutback in factories’ use of temporary help

services. Construction and retail trade had small

employment gains, as hiring early in the year barely

offset declines over the rest the year. Job cutbacks

in the travel industry intensified in the aftermath of

September 11. In contrast, health services and public and private higher education stepped up hiring

in 2001.

The unemployment rate rose to 5.6 percent

in the fourth quarter of 2001, an increase of 1.6

percentage points from the 30-year low of 4

percent, in the fourth quarter of 2000. The number of unemployed persons, at nearly 8 million

in the fourth quarter of 2001, was up by more

than 2 million from a year earlier. More than

two-thirds of those who lost their jobs in 2001

considered their layoff to be permanent. Total

employment fell by more than 1.3 million in

2001, the first over-the-year decline since 1991,

and the downturn affected workers in a wide

range of occupations.

This article examines these and other developments affecting the national and State labor

markets in 2001. The data are primarily from

the Current Employment Statistics survey (CES)

and the Current Population Survey (CPS). Both

are monthly surveys, although quarterly averages are used in this analysis, unless otherwise

noted. Over-the-year comparisons measure

changes from fourth quarter 2000 to fourth quarter 2001, unless otherwise noted. See the box

on page 4 for an explanation of differences between the two surveys.
4 Monthly Labor Review February 2002

U.S. labor market, 2001

The Bureau of Labor Statistics produces two monthly employment series that are independently obtained: the estimate of total nonfarm jobs, derived from the Current Employment Statistics (CES or establishment) survey, and the

estimate of total civilian employment, derived from the

Current Population Survey (CPS or household survey).

The CES survey is an employer-based survey that provides data on the number of payroll jobs in nonfarm industries. The CPS is a survey of households that provides data

on the labor force status (employed, unemployed, and not

in the labor force) of individuals, and includes information

on their demographic characteristics. The surveys are

largely complementary.

Employment estimates from the CPS include both agricultural and nonagricultural sectors and count persons in

any type of work arrangement: wage and salary workers,

self-employed persons, private household workers, and

unpaid workers who worked 15 hours or more in an enterprise operated by a family member. Estimates from the CES

survey refer only to persons on wage and salary workers

payrolls and exclude private household workers. As a result, the count of employment from the CPS is larger than

from the CES survey.

Partially offsetting the higher estimates from the CPS is

the fact that the CPS is a count of persons, and individuals

are counted only once, regardless of the number of jobs

they hold. In contrast, the CES survey is a count of jobs and

includes each job for persons who work in more than one

establishment.

There are other differences in the surveys’ methodology

and coverage. For example, the reference period for the

CPS is the week that includes the 12th day of the month,

while, for the CES survey, it is the pay period that includes

the 12th of the month. Pay periods vary in length and can

be longer than 1 week. It is therefore possible for the CES

survey estimate of employment to reflect a longer reference period than that used for the CPS.

The “universe” for the CPS is the civilian noninstitutional

population. This includes persons 16 years of age and older

residing in the United States who are not confined to institutions (for example, correctional, psychiatric, and longterm care facilities), and who are not on active duty in the

Armed Forces. In this regard, the coverage of the CES survey is broader: there is no age restriction in the CES, and

wage and salary civilian jobs held by uniformed military

personnel are counted, and persons who commute into the

United States from Mexico or Canada to work are counted

as employed.

Conceptual differences between employment estimates

from the Current Population Survey

and the Current Employment Statistics Survey

A confluence of factors deepened manufacturing’s downturn

in 2001. While declining auto sales and unfavorable foreign

trade were early factors in the slowdown, declining business

investment, especially in information technology goods, became the dominant factor later in the year. Manufacturing’s

downturn began in 2000, but worsened considerably in 2001.

This downturn followed a weak, short-lived period of expansion in manufacturing. In the fourth quarter of 1999, employment had barely begun to recover from the losses associated

with the 1998 Asian currency crisis. Even during that period,

hiring was minimal, and by the third quarter of 2000, the job

losses resumed. In 2001, factories eliminated 1,204,000 jobs

while sharply reducing their output, thus sending capacity utilization to its lowest levels since 1983.3 Although no single

factor caused the manufacturing downturn, two important

considerations were declining motor vehicle sales and increasingly unfavorable foreign trade.

By late summer of 2000, U.S. automakers anticipated a

decline in overall demand for new cars and light trucks. They

responded by reducing both output and employment, and by

sharply discounting new cars and light trucks. Although the

incentives did help 2000 to become the industry’s second

straight record sales year, the production cuts were not sufficient enough to prevent overstocked inventories by year’s end.

Accordingly, automakers extended their price incentives into

2001 and held production well below its year-2000 pace.4

As automakers had anticipated, U.S. auto sales did initially

fall in 2001. Employment in motor vehicles continued to drop

as well, with the industry laying off 89,000 workers for the

year. Part of the job losses represented general cost cutting

measures, as opposed to further production cuts, among the

major automakers. These companies had seen their profits

decline in 2001, partly because of the incentive war they initiated in an effort to regain market share from their European

and Asian competitors. Most of the motor vehicle industry’s

job losses, however, came not from the assembly plants but

from their first-tier suppliers. These suppliers, such as engine

and brake manufacturers, restructured their operations when

it became apparent that auto production would not rebound

to its year-2000 levels, and when automakers began to de-
Monthly Labor Review February 2002 5

Table 1. Employees on nonfarm payrolls by industry, quarterly averages, seasonally adjusted, 1995–2001

Industry 1999–2000 2000–2001 Annual average,

1995–2000

Thousands Percent

Change, fourth quarter to fourth quarter

Fourth

quarter,

1995

Fourth

quarter,

2000

[In thousands]

Thousands Percent Thousands Percent

See footnote at end of table.

Total nonfarm ............................................... 117,951 132,264 131,502 2,863 2.3 2,157 1.7 –762 –0.6

Total private ................................................ 98,627 111,669 110,480 2,608 2.5 1,925 1.8 –1,189 –1.1

Goods-producing ...................................... 24,298 25,704 24,590 281 1.1 136 .5 –1,114 –4.3

Mining ....................................................... 573 549 567 –5 –.9 16 3.0 18 3.3

Metal mining ............................................ 52 40 34 –2 –5.1 –2 –4.8 –6 -15.0

Oil and gas extraction ............................. 315 320 338 1 0.3 24 8.1 18 5.6

Nonmetallic minerals, except fuels .......... 105 114 113 2 1.7 0 0 –1 -0.9

Construction ............................................... 5,235 6,777 6,850 308 5.3 238 3.6 73 1.1

General building contractors .................... 1,219 1,547 1,559 66 4.9 64 4.3 12 0.8

Heavy construction, except building ........ 760 909 939 30 3.6 22 2.5 30 3.3

Special trade contractors ......................... 3,256 4,321 4,352 213 5.8 151 3.6 31 0.7

Manufacturing ............................................ 18,490 18,378 17,174 -22 –.1 –118 –.6 –1,204 –6.6

Durable goods .......................................... 10,709 11,116 10,252 81 .7 23 .2 –864 –7.8

Lumber and wood products .................... 772 816 784 9 1.1 –24 –2.9 –32 –3.9

Furniture and fixtures .............................. 507 557 501 10 1.9 5 .9 –56 –10.1

Stone, clay, and glass products .............. 538 577 562 8 1.4 4 .7 –15 –2.6

Primary metal industries ......................... 712 691 621 -4 –.6 –6 –.9 –70 –10.1

Fabricated metal products ...................... 1,439 1,536 1,439 19 1.3 12 .8 –97 –6.3

Industrial machinery

 and equipment ................................... 2,098 2,121 1,918 5 .2 4 .2 –203 –9.6

Computer and office equipment ............ 359 365 338 1 .3 2 .6 –27 –7.4

Electronic and other electrical

 equipment ............................................ 1,641 1,738 1,501 19 1.2 63 3.8 –237 –13.6

Electronic components and

 accessories ........................................ 599 707 592 22 3.4 60 9.3 –115 –16.3

Transportation equipment ....................... 1,766 1,820 1,704 11 .6 –55 –2.9 –116 –6.4

Motor vehicles and equipment .............. 971 992 903 4 .4 –30 –2.9 –89 –9.0

Aircraft and parts ................................... 430 463 455 7 1.5 –15 –3.1 –8 –1.7

Instruments and related products ........... 845 864 843 4 .4 17 2.0 –21 –2.4

Miscellaneous manufacturing

 industries .............................................. 390 395 378 1 .3 2 .5 –17 –4.3

Nondurable goods .................................... 7,781 7,262 6,922 –104 –1.4 –141 –1.9 –340 –4.7

Food and kindred products ..................... 1,702 1,680 1,688 –4 –.3 –13 –.8 8 .5

Tobacco products .................................... 42 32 33 –2 –5.3 –3 –8.6 1 3.1

Textile mill products ................................ 644 514 448 –26 –4.4 –31 –5.7 –66 –12.8

Apparel and other textile products .......... 902 610 535 –58 –7.5 –54 –8.1 –75 –12.3

Paper and allied products ....................... 689 654 626 –7 –1.0 –8 –1.2 –28 –4.3

Printing and publishing ........................... 1,543 1,541 1,454 0 0 –8 –.5 –87 –5.6

Chemicals and allied products ................ 1,035 1,038 1,024 1 .1 2 .2 –14 –1.3

Petroleum and coal products .................. 142 127 127 –3 –2.2 –2 –1.6 0 0

Rubber and miscellaneous

 plastics products .................................. 978 997 928 4 .4 –18 –1.8 –69 –6.9

Leather and leather products .................. 102 69 60 –7 –7.5 –5 –6.8 –9 –13.0

Service-producing ...................................... 93,653 106,560 106,912 2,581 2.6 2,021 1.9 352 .3

Transportation and public utilities ............ 6,193 7,092 6,962 180 2.7 177 2.6 –130 –1.8

Transportation ......................................... 3,963 4,572 4,425 122 2.9 115 2.6 –147 –3.2

Railroad transportation .......................... 236 234 224 0 –.2 –2 –.8 –10 –4.3

Local and interurban passenger

transit ..................................................... 426 478 481 10 2.3 2 .4 3 .6

Trucking and warehousing .................... 1,607 1,864 1,831 51 3.0 30 1.6 –33 –1.8

Water transportation .............................. 174 200 205 5 2.8 13 7.0 5 2.5

Transportation by air ............................. 1,098 1,307 1,228 42 3.5 61 4.9 –79 –6.0

Pipelines, except natural gas ................ 15 14 14 0 –1.4 1 7.7 0 0

Transportation services ......................... 407 476 442 14 3.2 11 2.4 –34 –7.1

Fourth

quarter,

2001
6 Monthly Labor Review February 2002

U.S. labor market, 2001

Table 1. Continued—Employees on nonfarm payrolls by industry, quarterly averages, seasonally adjusted, 1995–2001

[In thousands]

Communications and public utilities ....... 2,230 2,521 2,537 58 2.5 64 2.6 16 0.6

Communications .................................... 1,326 1,673 1,689 69 4.8 74 4.6 16 1.0

Electric, gas, and sanitary services ...... 904 848 848 –11 –1.3 –11 –1.3 0 0

Wholesale trade ........................................ 6,410 7,066 6,948 131 2.0 111 1.6 –118 –1.7

Durable goods ......................................... 3,746 4,204 4,095 92 2.3 45 1.1 –109 –2.6

Nondurable goods ................................... 2,664 2,861 2,853 39 1.4 65 2.3 –8 –.3

Retail trade ............................................... 21,314 23,394 23,404 416 1.9 325 1.4 10 0

Building materials and garden

supplies ................................................... 872 1,011 1,012 28 3.0 6 .6 1 .1

General merchandise stores .................. 2,688 2,829 2,765 28 1.0 21 .7 –64 –2.3

Department stores ................................. 2,356 2,484 2,417 26 1.1 21 .9 –67 –2.7

Food stores ............................................. 3,393 3,528 3,537 27 .8 24 .7 9 .3

Automotive dealers and service

 stations ............................................... 2,211 2,426 2,430 43 1.9 46 1.9 4 .2

New and used car dealers ...................... 1,006 1,123 1,137 23 2.2 29 2.7 14 1.2

Apparel and accessory stores ................ 1,103 1,208 1,203 21 1.8 25 2.1 –5 –.4

Furniture and home furnishings

 stores ................................................. 953 1,145 1,138 38 3.7 40 3.6 –7 –.6

Eating and drinking places ..................... 7,424 8,143 8,196 144 1.9 85 1.1 53 .7

Miscellaneous retail establishments ....... 2,671 3,105 3,123 87 3.1 79 2.6 18 .6

Finance, insurance, and real estate ......... 6,820 7,575 7,633 151 2.1 –1 .0 58 .8

Finance ................................................... 3,241 3,730 3,767 98 2.9 29 .8 37 1.0

Depository institutions ........................... 2,018 2,024 2,043 1 .1 –26 –1.3 19 .9

Commercial banks ................................. 1,460 1,420 1,427 –8 –.6 –36 –2.5 7 .5

Savings institutions ............................... 271 253 259 –4 –1.4 –2 –.8 6 2.4

Nondepository institutions ...................... 480 678 719 40 7.2 –25 –3.6 41 6.0

Security and commodity brokers ............ 532 770 747 48 7.7 60 8.5 –23 –3.0

Holding and other investment

 offices ................................................. 211 258 258 9 4.1 20 8.4 0 0

Insurance .................................................. 2,218 2,339 2,356 24 1.1 –30 –1.3 17 .7

Insurance carriers ................................... 1,518 1,582 1,598 13 .8 –27 –1.7 16 1.0

Insurance agents, brokers,

 and service ........................................... 700 757 759 11 1.6 –3 –.4 2 .3

Real estate ............................................... 1,361 1,507 1,509 29 2.1 2 .1 2 .1

Services1 ................................................... 33,591 40,838 40,942 1,449 4.0 1,177 3.0 104 .3

Agricultural services ................................ 592 811 842 44 6.5 29 3.7 31 3.8

Hotels and other lodging places ............. 1,677 1,937 1,852 52 2.9 69 3.7 –85 –4.4

Personal services ................................... 1,165 1,262 1,280 19 1.6 26 2.1 18 1.4

Business services1 .................................. 6,999 9,922 9,389 585 7.2 346 3.6 –533 –5.4

Services to buildings ............................. 891 998 994 21 2.3 5 .5 -4 –.4

Personnel supply services .................... 2,531 3,858 3,302 265 8.8 100 2.7 –556 –14.4

Help supply services ............................ 2,238 3,443 2,936 241 9.0 61 1.8 –507 –14.7

Computer and data processing

 services ............................................ 1,147 2,150 2,193 201 13.4 173 8.8 43 2.0

Auto repair, services, and parking .......... 1,041 1,271 1,302 46 4.1 53 4.4 31 2.4

Miscellaneous repair services ................ 365 366 360 0 .1 –3 –.8 –6 –1.6

Motion pictures ........................................ 502 593 582 18 3.4 –9 –1.5 –11 –1.9

Amusement and recreation services ...... 1,428 1,754 1,772 65 4.2 79 4.7 18 1.0

Health services1 ...................................... 9,328 10,165 10,457 167 1.7 151 1.5 292 2.9

Offices and clinics of medical doctors ... 1,638 1,942 1,998 61 3.5 47 2.5 56 2.9

Nursing and personal care facilities ...... 1,708 1,801 1,838 19 1.1 11 .6 37 2.1

Hospitals ................................................ 3,784 4,015 4,147 46 1.2 40 1.0 132 3.3

Home health care services .................... 650 644 657 –1 –.2 6 .9 13 2.0

Legal services ......................................... 920 1,014 1,031 19 2.0 11 1.1 17 1.7

Private schools and other

 educational services .......................... 1,987 2,341 2,446 71 3.3 51 2.2 105 4.5

Industry 1999–2000 2000–2001 Annual average,

1995–2000

Thousands Percent

Change, fourth quarter to fourth quarter

Fourth

quarter,

1995

Fourth

quarter,

2000

Thousands Percent Thousands Percent

Fourth

quarter,

2001

See footnote at end of table.
Monthly Labor Review February 2002 7

Table 1. Continued—Employees on nonfarm payrolls by industry, quarterly averages, seasonally adjusted, 1995–2001

[In thousands]

Industry 1999–2000 2000–2001 Annual average,

1995–2000

Thousands Percent

Change, fourth quarter to fourth quarter

Fourth

quarter,

1995

Fourth

quarter,

2000

Thousands Percent Thousands Percent

Fourth

quarter,

2001

1

 Includes other industries not shown separately.

NOTE: December figures are preliminary.

mand lower prices for parts.5

The production cutbacks further affected second-tier suppliers—that is, auto-related manufacturing industries, such as

automotive stampings and flat glass, which are not classified

within the same category as motor vehicles and equipment.

These auto-related industries, moving in step with the

automakers they serve, eliminated 9.5 percent of their

workforce, or 29,000 workers.6

The difficulties for primary metals manufacturers, like

those of the auto industry, date well before 2001, but worsened in 2001. Employment followed that same pattern, falling by 70,000 in 2001, after having decreased slightly—6,000

jobs—the prior year. Certainly, the slowing auto industry hurt

demand for steel, but the underlying, and fundamental, problem facing the industry was tenacious foreign competition, a

by-product of the strong dollar.

The dollar rose in 2001 to a 15-year high as the U.S.

economy and currency inspired confidence in investors, especially relative to the Euro-zone and Japan.7 By raising the

relative price of U.S. goods abroad, the elevated exchange

rate could potentially hurt export-dependent industries. At the

same time, it also could lead to import substitution in the

United States by lowering the relative price of foreign goods

here—thus exacerbating the dwindling demand for goods

manufactured domestically.

Heavy foreign exports to the United States first began to

erode steel prices, and the profits of U.S. steel companies, in

1998.8 Prices recovered somewhat in 2000, but falling domestic demand for steel drove them back down in 2001. Because of falling profits, numerous U.S. steel companies filed

for Chapter 11 bankruptcy protection, with Bethlehem Steel

marking the 20th bankruptcy filing in the industry since late

1998.9 Given the industry’s plight, in 2001, the International

Trade Commission initiated a review of the impact of steel

imports on U.S. manufacturers and found that 12 product

lines, covering 74 percent of imported steel, had been seriously injured because of imports.10

Paper and allied products, like primary metals, suffered

from a combination of falling demand from other domestic

manufacturers and a worsening trade outlook—in this case,

falling export demand.11 At the same time that the economic

slowdown in the United States hurt domestic demand for container board for shipping, exports of paper and allied products also fell sharply.12 As a result, this industry slashed

28,000 jobs, quadrupling its prior 6-year average declines.

The recession also cut into advertising revenue for all types

of media, including print media, a fundamental client of paper manufacturers.13 Job losses in printing and publishing

totaled 87,000 positions. Commercial printing and newspapers accounted for most of the layoffs, although periodicals

Social services1 ....................................... 2,363 2,960 3,101 119 4.6 130 4.6 141 4.8

Child day care services ......................... 564 727 756 33 5.2 38 5.5 29 4.0

Residential care ..................................... 653 820 854 33 4.7 35 4.5 34 4.1

Museums and botanical

 and zoological gardens ...................... 82 108 111 5 5.7 6 5.9 3 2.8

Membership organizations ..................... 2,163 2,485 2,505 64 2.8 29 1.2 20 .8

Engineering and management

 services1 ............................................. 2,774 3,478 3,540 141 4.6 165 5.0 62 1.8

Engineering and architectural

 services ............................................ 824 1,036 1,066 42 4.7 58 5.9 30 2.9

Management and public relations ......... 833 1,112 1,125 56 5.9 62 5.9 13 1.2

Government .............................................. 19,324 20,595 21,022 254 1.3 232 1.1 427 2.1

Federal .................................................... 2,795 2,618 2,615 –35 –1.3 –28 –1.1 –3 –.1

Federal, except Postal Service ............. 1,948 1,759 1,777 –38 –2.0 –21 –1.2 18 1.0

State government .................................... 4,622 4,802 4,922 36 .8 48 1.0 120 2.5

State government, except education .... 2,708 2,767 2,811 12 .4 27 1.0 44 1.6

State government education ................. 1,915 2,035 2,111 24 1.2 21 1.0 76 3.7

Local government ................................... 11,906 13,175 13,485 254 2.0 212 1.6 310 2.4

Local government, except education .... 5,271 5,725 5,859 91 1.7 131 2.3 134 2.3

Local government education ................. 6,635 7,450 7,627 163 2.3 81 1.1 177 2.4
8 Monthly Labor Review February 2002

U.S. labor market, 2001

Chart 1. Employment in IT manufacturing, seasonally adjusted

and book publishing also experienced significant, and unusual, declines.

As manufacturing profits fell, so did outlays for capital

goods in 2001.14 With the recruiting difficulties firms had recently faced still fresh in their minds, many considered it “less

painful” to slash capital spending, particularly on high-technology goods, before turning to their payrolls to cut costs.15

As a result, orders for machinery and computer equipment

slumped last year. For many industrial machinery manufacturers, weak exports only added to their woes. Overall employment in industrial machinery dropped by 203,000 jobs

last year, after having grown slightly in 2000. Since this industry alone accounts for 17 percent of the manufacturing job

losses in 2001, it is worth examining some of the specific

component industries.

Metalworking machinery had the bleakest employment

picture, reducing its ranks by 39,000. Although this industry

had been losing jobs since early 1998—coinciding with the

Asian financial crisis—the layoffs in 2001 easily exceeded

the prior years’ total. Total shipments dropped off by 12 percent, with the foreign sales falling somewhat faster than sales

to U.S. customers.16

Job losses in construction machinery and general industrial machinery, however, derived more from poor U.S. sales

than from foreign purchases. Indeed, despite rising exports of

construction machinery, total shipments turned downward in

2001, and employment dropped by 21,000 jobs. General industrial machinery saw its foreign shipments decline, but

this decline accounted for only a fraction of the industry’s

decline in sales. In other words, the drop in domestic demand

contributed to most of the job losses in general industrial

machinery. For 2001, this industry reduced its payrolls by

28,000 jobs, after having cut only 4,000 jobs in 2000.

Special industrial machinery exports and employment both

turned downward in 2001, partly because of this industry’s

ties to high-technology manufacturing. After bringing on

5,000 additional workers in 2000, the industry’s employment

shrank by 29,000 last year. The change in exports was even

more dramatic: after surging 42.2 percent in 2000, exports

slipped back 33.6 percent last year. Although exports to a

variety of regions fell, Taiwan’s 63.3 percent and South

Korea’s 48.3 percent declines stand out, reflecting the severity of the information technology (IT) downturn in those countries.17

 For producers of IT equipment such as computers, semiconductors, and communications equipment, orders dropped

late in 2000, sparking layoffs. 18 For the year, IT manufacturers reduced their ranks by 188,000 jobs, directly accounting

NOTE: Series includes Standard Industrial Classification (SIC) codes 357 (computer and office equipment), 366 (communications

equipment) and 367 (electronic components and accessories).

1994 1995 1996 1997 1998 1999 2000 2001

1,100

1,200

1,300

1,400

1,100

1,200

1,300

1,400

Employment 

in thousands

Employment 

in thousands
Monthly Labor Review February 2002 9

for 15.6 percent of manufacturing’s job losses. (See chart 1.)

In 1 year, these industries effectively reversed the net job gains

of the prior 6 years. Capacity utilization fell from a May 2000

high of 88.8 percent to a historic low of 60 percent. Yet, as

fast as IT manufacturers cut output and payrolls, these cutbacks still lagged behind the plummeting demand for their

products. The IT slump spread throughout and beyond

manufacturing. Within manufacturing, and aside from the

IT manufacturers already mentioned, the clearest impact was

experienced in miscellaneous electrical equipment and supplies, which includes makers of magnetic and optical recording media, and in measuring and controlling devices. Employment in the former declined by 21,000, after having declined

by 4,000 the previous year, while the latter eliminated 17,000

jobs, erasing its year-2000 gains.

Beyond manufacturing, the problems in IT involved the

telecommunications industry; indeed, it emanated largely

from the profit problems of telecom companies.19 These woes,

and the ensuing investment cutbacks, began prior to 2001,

although employment in telephone communications held firm

until the second quarter of 2001. The subsequent job losses

totaled 17,000. Although this decline is small, it is a contrast

to the industry’s 8-year expansion, during which employment

ballooned 34 percent to more than 1.1 million.

The rise and fall of the NASDAQ composite index perhaps

best captured the breadth and speed of IT’s rapid expansion

and subsequent contraction, given its role as a marketplace

for financing many Internet startups. In a short 10-month

span—between March 10, 2000 and the end of 2000—the

NASDAQ plunged more than 50 percent. Subsequently, equity

underwriting by investment banks slumped. As stock valuations fell, investor interest in Internet ventures waned, and

the ventures’ falling liquidity stifled demand for semiconductors and other IT-related goods. Yet this slump in Internet investment did not immediately impact employment in security

and commodity brokers. It was merely symptomatic of

broader economic ills, which hurt the overall securities

industry’s revenues. Even as those ills wore away at the

strength of the Standard & Poor’s 500 index and other broad

indices, the effect on brokerages’ hiring was not felt immediately, in part because firms were uncertain about how long

the downturn would last.20 Employment peaked in March

2001, and the first significant employment decline came in

May. For the year, employment in security and commodity

brokerages shrank by 23,000, its first contraction since the

1990 recession.

Manufacturing’s downturn spread deeply into the serviceproducing sector. The close and obvious ties manufacturing

maintains with trucking and warehousing and with wholesale

trade became especially evident as the economy entered recession.21 For 2001, wholesale trade lost 118,000 jobs. Although most component industries shrank, more than half of

the losses came in two industries: wholesale trade of professional and commercial equipment cut 36,000 positions and

electrical goods trimmed 35,000. These layoffs relate directly

to the slump in spending on information technology goods.

Employment decreased by 13,000 in machinery, equipment,

and supplies and by 5,000 in motor vehicles parts and supplies, thus reflecting the downturn in industrial machinery and

in car and truck production. Nondurable goods wholesalers

reduced their ranks by 8,000 jobs in 2001, in contrast to the

prior year’s job growth of 65,000.

Trucking and warehousing cut 33,000 jobs in 2001, erasing all of its year 2000 gains. Trucking companies had been

suffering since early 2000, as decreased truck tonnage, high

fuel prices, and poor used truck values bit into profits and

slowed employment growth.22 Truck tonnage bottomed at the

end of 2000 but recovered slightly in 2001.23 While manufacturers purchase 43 percent of trucking services, other purchasers are spread throughout the economy.24 That diversity

may have kept tonnage from falling even further in 2001, but

it could not allay a decline in employment.

In 2001, it became increasingly apparent that manufacturing was relying heavily on temporary help services—an industry classified within the service sector. Just as the auto

industry increased its production flexibility and reduced risk

by shifting output from final assembly plants to suppliers

during the 1990s, many companies shifted part of their labor

input from their own payrolls to those of personnel supply

companies (which include agencies that provide temporary

staffing workers).25 That shift applies across the economy and

is an underlying force behind the industry’s 154 percent

growth from fourth quarter 1991 through fourth quarter 2000.

Hiring in personnel supply slowed sharply in mid-2000, and

by the fourth quarter, the temporary help industry’s employment trend had turned downward, coinciding with the accelerating layoffs in manufacturing. This trend continued

throughout 2001, and by the end of the year, personnel supply services had cut its payrolls by 556,000 jobs, or 14.4 percent. No other industry cut even half that number of positions, and in percentage terms, only a handful exceeded personnel supplies’ 14.4-percent pace.26 Almost single-handedly,

this industry pushed services overall employment growth

down to 0.3 percent, its worst showing since 1944.

The employment growth slowdown in computer and data

processing services was even more abrupt than that experienced by personnel services. The computer services industry

provides contract services to other business, including manufacturing firms. The expansion in computer services spans

the entire 30-year history of its employment series, but flattened in the summer of 2001. Although computer services

employment ended the year up by 43,000, that annual job

growth pales when compared with the 177,000 averaged over
10 Monthly Labor Review February 2002

U.S. labor market, 2001

the previous 7 years.

The broad customer base and employment trends of management and public relations closely resemble those of computer services.27 Job growth in management consulting essentially stopped in March 2001, ending a nearly 10-year

expansion—during which employment had surged more than

80 percent. Over the rest of the year, these companies had

managed to keep their job numbers unchanged.

Employment growth slowed markedly in 2001, in another

industry that provides a service to businesses—engineering

and architectural services. This industry brought on 30,000

workers, reaching close to half its year-2000 gains. Still, those

gains easily bettered engineering and architectural services’

stagnant performance during the 1990–91 recession. The fact

that this industry sells most of its services to the construction

industry helped to insulate it from the general economic

downturn.28 Similar ties to the construction industry helped

manufacturing industries that produce building materials and

supplies. In these construction-related manufacturing industries, employment decreased by 72,000, or 4.1 percent, about

three-fifths the rate of overall manufacturing.29 To assess the

relative strength of these construction-related industries, it is

fundamental to analyze the unusual resiliency of the construction industry itself as the recession developed.

Low mortgage rates boosted the housing market and softened the slowdown in construction and real estate. Construction employment continued growing throughout the first

quarter of 2001; this growth was helped by mild winter weather

across the Nation.30 Employment reached a plateau in midyear, reflecting the decay in private nonresidential construction activity. In contrast, residential building activity held

steady for much of the year, while public construction work

increased.31 For the year, employment in construction rose

by 73,000, with all of the growth occurring in the first quarter. While that increase equals only approximately one-fourth

of the industry’s prior 8-year growth rate, it is unusually strong

for a recession year.

Heavy construction showed the greatest resiliency among

construction industries in 2001. The industry added 30,000

workers, equaling its prior 5-year average growth. Highway

spending continued to benefit from the $217 billion, 6-year

Transportation Equity Act for the 21st century.32 Last year’s

increased public spending on sewer systems and water supply

facilities—a related result of continued heavy construction

work—also provided many in the labor force with prolonged employment opportunities, even as the recession

deepened.33

In contrast, in 2001, the weakest area of construction was

private nonresidential building. As measured by value put in

place, nonresidential building peaked in mid-spring, but fell

sharply in summer, and by autumn had retreated to levels last

seen in 1996.34 As nonresidential construction activity deteriorated, its employment also fell, more than offsetting gains

from earlier in the year. As a result, employment declined by

6,000 over the year—an abrupt departure from the industry’s

average annual gains of 20,000 throughout its prior 8-year

expansion.

Hiring in special trade contractors closely paralleled that

of nonresidential building. Although employment growth held

steady in the first quarter, much of that growth diminished

throughout the following quarters. For the year, employment

in special trade contractors rose by 31,000, only a fraction of

the 200,000 new jobs it had averaged over the prior 8 years.

Sliding mortgage rates and steady consumer confidence

buttressed residential construction, at least until midyear.35

Average rates for conventional 30-year fixed-rate mortgages

peaked at 8.52 in May 2000, but fell more than 1.5 percentage points by the start of 2001. Most of the year, interest rates

hovered between 7.0 and 7.1 percent, while dipping downward briefly again in autumn. These conditions revived

housing starts, which had begun to taper off in late 2000. Consequently, employment in residential building contractors

inched upward in 2001, rising 18,000 for the year, versus

growth of 47,000 in 2000.

Sales of existing homes, like those of new homes, hovered

close to their prior 2 years’ levels for much of 2001, and real

estate employment matched that flat trend. Although the median price of existing single-family homes continued to grow,

affordability rose as well, thanks to moderating mortgage

rates.36 Appreciating home values reinforced the investment

aspect of home buying, in sharp contrast to falling stock

prices.

Purchasing a home traditionally sparks a buying spree focused around furnishing the new abode. Conversely, sluggish home sales are reflected in decreased furniture sales. In

2001, furniture sales mirrored the plateau in home sales—

employment fell in both furniture manufacturing and retailing. Furniture manufacturers’ troubles date from mid-2000,

when weakening profits led to cuts in production and employment, and the downturn intensified in 2001. Job losses

reached 56,000, the largest year-to-year employment decline

in the series’ 54-year history. The industry’s problems were

threefold: increasing competition from imports, in particular,

from China, whose furniture exports to the United States increased 13.1 percent in 2001; the bankruptcy declaration of

Montgomery Ward and the closing of numerous J.C. Penney

stores, which eroded a significant share of the furniture marketplace; and consolidation among traditional furniture retailers.37 Although sales in furniture stores held steady in

2001, the number of bankruptcy filings increased. The industry had become increasingly fragmented in recent years, with
Monthly Labor Review February 2002 11

conventional furniture stores losing business to discount

furniture stores and manufacturer-controlled outlets.38 The resulting consolidation dampened employment growth in furniture and home furnishing stores, with payrolls expanding by

only 6,000 jobs last year, after having risen an average of

19,000 during each of the previous 8 years.

Declining mortgage rates benefited not only prospective

home buyers, but also homeowners who either wanted to tap

into their equity or to refinance and take advantage of lower

interest rates, which could result in lower mortgage payments.

Mortgage refinancing skyrocketed early in 2001, and again

in the summer, reaching year-to-year growth of more than 800

percent.39 This new activity, on top of the stable demand for

new mortgages, boosted hiring in mortgage bankers and brokers by 32,000 workers last year, nearly compensating for the

layoffs it had experienced in 2000, when refinancing waned.

As sales growth slackened and competitive pressures intensified, employment gains in retail trade slowed sharply. Mortgage refinancing, spurred by declining mortgage rates and

appreciating home prices, and last summer’s Federal tax rebate most likely helped sustain consumer spending and, thus,

employment in retail trade through July 2001.40 The September 11th tragedy outweighed those positives, however, and

retail sales (excluding motor vehicles) did not completely

recover from the initial shock of the attacks.41 Retail trade

hiring reflected that pattern. While the industry as a whole

expanded through July, the subsequent layoffs were severe.

Moreover, stores delayed their traditional Christmas hiring,

adopting a “wait-and-see” attitude. For the year, retail trade

employment rose a mere 10,000—its worst showing since the

1991 recession.

Although that pattern applies to the retail sector in general, the situation of individual industries within that sector

varied, depending principally on their financial health earlier

in the year. For example, the ills of conventional department

stores date from well before 2001. Job losses in department

stores (which includes both financially troubled traditional,

or conventional, chains, as well as their more solvent discount

competitors) date from April 2000. Indeed, in 2000, discount

department stores enjoyed 7.7 percent sales growth while

conventional chains saw essentially no growth in sales.42 That

zero growth turned into a 5.5 percent sales decline in 2001, in

contrast to the 3.4-percent rise for discount chains. Post-September 11th sales figures highlighted this disparity even

more.43 Store closings and bankruptcy filings spanned all of

2001, and so did job losses. Department stores cut 67,000

jobs after having hired an average of 26,000 workers a year

during the prior 4 years.

As discount chains expanded the number of operating

stores, they also broadened the scope of their product offerings. As a result, their influence affected other sectors, including furniture and home furnishings, as discussed previously, and food stores. Despite relatively stable sales growth,

employment in food stores rose by only 9,000 jobs, or 0.3

percent, down sharply from the 0.8 annual growth rate it had

averaged between 1996 and 2000. As was true throughout

retailing in general, this growth merely reflected hiring completed early in the year. May marked the beginning of net job

losses in food stores, with the losses continuing through the

end of 2001.

Unlike department stores, food stores did not see any of its

largest chains declare bankruptcy. Rather, the chains’ layoffs

resulted largely from the bankruptcy filings of independent

grocers and small chains, in combination with a number of

large chains shutting down some “underperforming” units.44

Although supermarkets often sell their closed stores to other

supermarket chains, such sales became increasingly difficult

for the smaller sized establishments, because their stores were

not perceived as viable assets. Moreover, the opening of a

single supercenter could provoke the closing of several older

supermarkets, which resulted in a glut of small store sites for

sale in some markets.45 In short, an increasingly competitive

market led food stores’ employment to start falling, even as

sales continued to grow.

Competition was the impetus driving the food stores’ closings, but it had the opposite effect for auto dealers: employment continued to rise, even as sales slipped from their

year-2000 pace. New and used car dealers increased their

staffing by 14,000 workers, or at about half their 2000 rate.

Historically, employment in auto dealers has tended to be

highly cyclical. (See chart 2.) Between 1989 and 1991 (and

thus encompassing the 1990–91 recession), this industry

eliminated 94,000 jobs, or 9.7 percent of its workforce. Yet,

the 2001 marketplace differed greatly from that of a decade

ago. During the 1990s, auto dealers began to derive a larger

share of their profit from after-sales services and from usedvehicle sales.46 The increasing incidence of “certified” used

car programs and the need for warranty service on the many

new vehicles sold during 1999 and 2000 (both record sales

years) provided incentives to maintain or expand service payrolls.47 An additional boost to employment came when zeropercent financing jump started auto sales in the fourth quarter

of 2001. For the rest of retailing, however, the outlook in autumn was negative, and seasonal hiring was subdued .

Pre- and post-September 11th labor market. Economic weaknesses were intensified by the terrorist attacks of September

11. By September, three separate phenomena were at play.

Retailers already had been anticipating weak holiday sales.

The travel industry struggled with declining business travel

and dampened leisure demand. New orders for civil aircraft
12 Monthly Labor Review February 2002

U.S. labor market, 2001

Chart 2. Over-the-year percent change in automobile sales (12-month average) and employment

Chart 3. Over-the-year percent change in health services employment, seasonally adjusted

NOTE: Shaded regions represent recessions as designated by the National Bureau of Economic Research.

1978 1982 1986 1990 1994 1998

0

2

4

6

8

0

2

4

6

8

Percent Percent

NOTE: Data are seasonally adjusted.

SOURCES: Bureau of Labor Statistics and Bureau of Economic Analysis.

1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000

–30

–20

–10

0

10

20

30

Sales

Employment

–30

–20

–10

0

10

20

30

Percent Percent
Monthly Labor Review February 2002 13

had started to diminish in the spring. Those negative trends

worsened, with the employment situation in those industries

deteriorating after the events of September 11.

For retailers, the pre-September 11th backdrop included

mounting competition, especially from discount department

stores, and waning consumer confidence. By September, falling payroll employment and the declining workweek had begun to offset the economic benefits of continued, solid gains

in nominal (and real) average hourly earnings of production

workers. As a result, growth of private aggregate payrolls stagnated. This sluggish growth in consumers’ potential holiday

budgets diminished retailers’ holiday sales expectation, with

the terrorist attacks creating a sense of collective apprehension among the population. Consequently, stores scaled back

their seasonal hiring. As a whole, general merchandise, apparel, and miscellaneous retail stores added 587,000 workers

during the fourth quarter, or nearly 140,000 fewer holiday

workers than they had brought on in prior years (data are not

seasonally adjusted).

Travel-dependent industries span air transportation, travel

services, hotels and other lodging places, and eating and

drinking places—all of which had experienced weakening

demand throughout summer 2001, particularly from business

travelers. Airlines derive much of their revenue from corporate customers, and travel, like labor, was an outlay many

companies sought to reduce. As a result, passenger revenue

miles from January to August 2001 had shown no growth from

their previous levels for the same period in 2000. Weakened

demand exacerbated an already difficult financial situation

for airlines, which began the year facing rising fuel and labor

costs.48 Together, these factors led to net job losses by midsummer.

Hotels and other lodging places faced similar misfortunes

in the summer months. The industry’s principle problem was

reduced business bookings, although leisure travel also

proved lackluster in 2001, providing little economic relief.49

Under these circumstances, the need for additional summer

help diminished and seasonal hiring suffered. Seasonally adjusted employment peaked in March and then fell nearly every subsequent month for a total decline of 47,000 jobs by

September. Low demand and falling per-ticket commissions

translated into job losses for travel agents as well, with transportation services employment declining by 16,000 between

its March peak and September.

Amusement and recreation services also cut back on summer hiring, although not nearly to the same degree as had

hotels. After seasonal adjustment, employment reached an

apex in May and was 21,000 lower by September. This

industry’s relative resilience may be due to consumers

shifting, as opposed to stopping, their spending on leisure

activities. For example, attendance slackened at large, internationally-known amusement parks, but consumers did desire vacations closer to home; therefore, attendance at smaller

regional parks increased.50

The limited demand that leisure travel had provided these

industries ended on September 11. Following the initial 1-

week halt to national air traffic, travel demand experienced

only a partial recovery. The travel industry reacted by immediately announcing and enacting massive layoffs, with airlines

cutting 102,000 jobs and hotels, 70,000 jobs between September and December. Those layoffs exceeded those seen in

any prior downturn on record for those industries.51 The decreased demand also led to major cutbacks in transportation

services and auto rentals. Together, employment in these industries shrank by 39,000 in the fourth quarter.

The layoffs in air transportation accompanied severe

schedule reductions, which in many cases exceeded 20 percent of airlines’ pre-September 11th levels. With planes

grounded, the need for new aircraft dropped, as did the airlines’ ability to pay for them. In October, employment in aircraft manufacturing fell by 2,000, erasing all of the prior

year’s gains made during the first 9 months of the year. Those

earlier gains had marked the industry’s first, albeit tentative,

expansion since the 1998 Asian financial crisis. The post-September 11th layoffs marked a quick reaction by manufacturers, already concerned because of the weak travel industry.52

New orders for business craft and jetliners had begun to fall

in the spring. After September 11, airline companies revised

their orders, sometimes asking for delayed delivery schedules, and manufacturers responded by reducing their payrolls

to accommodate these new production schedules.53

The terrorist attacks did, however, lead to increased hiring

in one industry: detective and armored car services. Between

September and December 2001, employment in this industry

rose 35,000. Such gains were unprecedented in the history of

that employment series, and more than tripled the industry’s

2001 job growth until September.

Health services and higher education proved countercyclical

in 2001. In 2001, health services and higher public and private education proved immune to the widespread economic

downturn. Indeed, both may have benefited from it. Payrolls

in these two countercyclical service industries increased by

434,000 jobs, more than double the 166,000 added in 2000.

Within health services, hospitals led the expansion, growing by 132,000 jobs, or 3.3 percent—three times the prior

year’s pace. (See chart 3.) Higher reimbursement rates most

likely boosted hiring. Revenue growth, particularly from public payers, has tended to follow a countercyclical pattern in

recent decades, and that pattern has remained steady into the

current downturn.54 The Medicare, Medicaid, and State

Children’s Health Insurance Program Benefits Improvement
14 Monthly Labor Review February 2002

U.S. labor market, 2001

NOTE: Shaded regions represent recessions as designated by the National Bureau of Economic Research. Data are quarterly.

SOURCE: Bureau of Labor Statistics, Current Population Survey.

Chart 4. Unemployment rate, 1969–2001, seasonally adjusted

1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001

0

2

4

6

8

10

12

0

2

4

6

8

10

12

and Protection Act of 2000, signed in December of that year,

provided for increased outpatient and inpatient reimbursements totaling about $12 billion over 5 years.55 The Act eased

spending restrictions that had been imposed by the 1997 Balanced Budget Act.

On top of higher Medicare reimbursements came increased

payments from private insurers. Changes in the Producer Price

Index (PPI) measure changes in nominal revenue streams.56

Thus, growth in the PPI is one indicator of rising revenues in

an industry, such as health services, whose demand varies little

from one year to the next, because it is dependent on demographic trends. For general medical and surgical hospitals,

the PPI for “all other patients” (that is, those patients who are

covered by private insurers or pay out of pocket) rose 2.8

percent over the year (as of November). Such growth was

approximately 40 percent higher than that of the PPI for Medicare and Medicaid patients.57

Post-acute care providers followed hospitals’ lead in 2001.

Home health care services increased its ranks by 13,000, thus

doubling its 2000 hiring pace, while the 37,000 jobs gained

in nursing and personal care facilities more than tripled this

industry’s prior year growth. Although the Benefits Improvement and Protection Act of 2000 did not address nursing

homes, this industry continued to enjoy strong revenue

growth. The PPI for skilled and intermediate care facilities rose

by 6.3 percent (November to November), outpacing its prior

year rate of 5.6 percent. Home health’s PPI increase totaled

2.5 percent, which was somewhat lower than the 3.7 percent

growth from 2000, but a marked improvement over 1999’s

0.8-percent growth.

Health care’s vitality extended beyond health services and

into manufacturing, as drug manufacturers expanded their

ranks by 16,000 workers. Including last year’s gains, employment in drugs increased 28.6 percent since 1996. Medical

instruments and supplies also experienced consistent

growth—10.2 percent—between 1995 and 2000. Its expansion slowed in 2001, with total employment increasing by

2,000. Nonetheless, even that modest gain contrasts sharply

with steep losses in most other manufacturing industries, and

reflects the strength in this industry’s ties to health services.

One other countercyclical factor affecting this industry was

the loosening of the labor market in 2001, which may have

benefited health services’ hiring in some of its lesser-skilled

occupations. Employment in this industry may have been perceived more favorably, especially given the negative outlook

in retail trade, another industry with numerous low-skill jobs.

Those same elements may have also encouraged some people

to return to school for further education, and likely would

Percent Percent
Monthly Labor Review February 2002 15

have occurred in addition to the enrollment increases that had

been projected for 2001.58 In that light, the hiring increases

in higher private and public education may be better understood.

Hiring by colleges grew considerably in 2001. Employment in State government education, which primarily consists

of universities, was augmented by 76,000 new positions last

year, more than tripling its pace of recent years. A similar

though much more moderate countercyclical pattern prevailed

in 1991. Payrolls of private colleges and universities increased

by 66,000 jobs, after having fallen by 6,000 in 2000.

The economic recession and concomitant employment losses

in a wide range of industries were felt by workers in all major demographic groups. Total employment started declining early in 2001, and fell steeply as the year progressed. The

number of employed persons (as measured in the CPS) fell by

more than 1.3 million, and unemployment rose sharply. Over

the year, the number of unemployed persons rose by 2.4 million to nearly 8 million. In the fourth quarter of 2001, the

national unemployment rate was 5.6 percent, up 1.6 percentage points from the fourth quarter of 2000. (See chart 4.)

Unemployment rose for every major worker group.

The number of employed teenagers fell by 528,000 over

the year. (See table 2.) Many teens withdrew from the labor

force; the teen labor force participation rate fell by 3 percentage points to 49.1 percent.59 The number of unemployed

teens—those without a job but available and actively looking

for work—rose by 184,000 in 2001, raising the teen unemployment rate from 12.9 percent in the fourth quarter of 2000

to 15.8 percent a year later, its highest level since the third

quarter of 1997. Teen employment losses were concentrated

in the retail trade industries.

The decrease in teen labor force participation reflects a

marked decline in the demand for young workers that is fairly

typical at the onset of a contraction in economic activity.60

Teens generally have less experience and fewer skills than do

older workers; therefore, often, they are among the first to

experience difficulties retaining jobs or finding new ones

when employers trim payrolls. The decreased labor force participation rate suggests that many of these youth have reacted to such difficulties by leaving the labor force, possibly

to pursue higher education or leisure activities.

Adults certainly are not immune to the effects of a slowdown, yet they often do not have the option of withdrawing

from the labor force when labor market conditions deteriorate.61 Employment among adults of both sexes declined

throughout the year, but the labor force participation rate

showed little change among both adult men and women in

2001. Employment among adult men declined by about

481,000, considerably more than the 332,000 decline for adult

women. The decline in manufacturing greatly affected employment among both men and women. Men also experienced

large employment declines in the services industry, worsening their employment situation even further.

The employment-population ratio for adult women rose to

58.9 percent in the first quarter of 2001, before dropping to

57.9 percent. In 2001, the employment-population ratio for

adult men fell steadily to 72.6 percent. As employment fell,

the number of unemployed persons rose sharply. The unemployment rate for both adult men and women rose by 1.6 percentage points to end the year at 5 percent.

All major race and ethnic groups faced deteriorating job

market conditions in 2001. Employment among white workers peaked in the first quarter of 2001, only to fall during the

remaining three quarters. The employment-population ratio

dropped by 1.1 percentage points over the year, to 63.8

percent. (See table 2.) This was the sharpest decline in the

employment-population ratio for whites since the 1990–91

recession. The unemployment rate for whites rose by 1.4 percentage points over the year to 4.9 percent. Black employment losses started early in 2001 and accelerated during the

year, particularly in the fourth quarter. The employment-population ratio among blacks also fell markedly—by 2.2 percentage points to 58.7 percent—the largest drop since 1975. The

unemployment rate for blacks rose considerably, to 9.9 percent in the fourth quarter of 2001, up from 7.4 percent a year

earlier. Hispanic workers also experienced declining employment in the second quarter of 2001, but interestingly, their

rate of employment rose slightly thereafter. Hispanic workers

most likely benefited from the resiliency in construction, in

which a large proportion of Hispanic men are employed, as

well as from a large employment increase within services industries. The increase in Hispanic employment, however, did

not keep pace with population growth. The employmentpopulation ratio for Hispanics fell by 1.7 percentage points to

a level of 63.1 percent by the fourth quarter of 2001. This

ratio had reached an all-time high in the first half of 2001, but

then drifted downward. As with whites and blacks, the number of unemployed Hispanic workers rose in 2001. This was

reflected in a rise of 1.9 percentage points in the unemployment rate, which reached 7.5 percent by year’s end.

Unemployment rose for all family types, particularly affecting married-couple families in 2001.62 Between the fourth

quarters of 2000 and 2001, the family unemployment rate in

families maintained by men rose 2.9 percentage points to 8.9

percent. 63 In the same period, the rate in families maintained

by women rose by 2 percentage points to 8.2 percent. More

than two-thirds of the increase in family unemployment was

within the group of married-couple families in 2001. The family unemployment rate for this group rose from 3.4 to 5.1 percent over the year. (See table 3.)
16 Monthly Labor Review February 2002

U.S. labor market, 2001

Table 2.

 Total

Civilian labor force .............................. 138,440 140,036 141,257 141,749 141,549 141,700 142,291 1,034

Participation rate ............................ 67.2 67.1 67.1 67.2 66.9 66.8 66.9 –.2

Employed .......................................... 132,302 134,292 135,649 135,804 135,221 134,839 134,308 –1,341

Employment-population ratio ......... 64.2 64.4 64.4 64.4 63.9 63.6 63.1 –1.3

Unemployed ...................................... 6,138 5,744 5,609 5,945 6,328 6,860 7,983 2,374

Unemployment rate ....................... 4.4 4.1 4.0 4.2 4.5 4.8 5.6 1.6

 Men, 20 years and older

Civilian labor force .............................. 70,063 70,481 71,230 71,321 71,479 71,609 71,954 724

Participation rate ............................ 76.8 76.6 76.6 76.5 76.4 76.3 76.5 –.1

Employed ......................................... 67,557 68,099 68,803 68,737 68,651 68,565 68,322 –481

Employment-population ratio ......... 74.1 74.0 73.9 73.7 73.4 73.1 72.6 –1.3

Unemployed .................................... 2,506 2,382 2,427 2,584 2,828 3,045 3,632 1,205

Unemployment rate ....................... 3.6 3.4 3.4 3.6 4.0 4.3 5.0 1.6

 Women, 20 years and older

Civilian labor force .............................. 60,064 61,173 61,703 62,177 62,044 62,156 62,357 654

Participation rate ............................ 60.6 60.8 60.8 61.1 60.9 60.8 60.9 .1

Employed ......................................... 57,652 58,959 59,597 59,942 59,676 59,543 59,265 –332

Employment-population ratio ......... 58.2 58.6 58.7 58.9 58.5 58.3 57.9 –.8

Unemployed .................................... 2,412 2,214 2,106 2,235 2,367 2,613 3,092 986

Unemployment rate ....................... 4.0 3.6 3.4 3.6 3.8 4.2 5.0 1.6

 Both sexes, 16 to 19 years

Civilian labor force .............................. 8,313 8,382 8,324 8,251 8,026 7,935 7,980 –344

Participation rate ............................ 52.6 52.0 52.1 51.3 50.0 49.1 49.1 –3.0

Employed ......................................... 7,093 7,235 7,249 7,125 6,893 6,732 6,721 –528

Employment-population ratio ......... 44.9 44.9 45.3 44.3 42.9 41.7 41.4 –3.9

Unemployed .................................... 1,221 1,147 1,075 1,126 1,133 1,203 1,259 184

Unemployment rate ....................... 14.7 13.7 12.9 13.6 14.1 15.2 15.8 2.9

 White

Civilian labor force .............................. 115,963 116,933 117,748 118,329 117,891 118,024 118,492 744

Participation rate ............................ 67.4 67.3 67.3 67.4 67.1 67.0 67.1 –.2

Employed ......................................... 111,488 112,839 113,671 113,815 113,254 113,021 112,639 –1,032

Employment-population ratio ......... 64.8 65.0 64.9 64.9 64.5 64.2 63.8 –1.1

Unemployed .................................... 4,476 4,094 4,077 4,329 4,636 5,003 5,852 1,775

Unemployment rate ....................... 3.9 3.5 3.5 3.7 3.9 4.2 4.9 1.4

 Black

Civilian labor force .............................. 16,177 16,504 16,700 16,721 16,687 16,744 16,756 56

Participation rate ............................ 66.0 66.0 65.8 65.8 65.4 65.4 65.1 –.7

Employed ......................................... 14,834 15,175 15,460 15,378 15,315 15,295 15,102 –358

Employment-population ratio ......... 60.5 60.7 60.9 60.5 60.1 59.7 58.7 –2.2

Unemployed .................................... 1,343 1,329 1,239 1,343 1,372 1,449 1,654 415

Unemployment rate ....................... 8.3 8.1 7.4 8.0 8.2 8.7 9.9 2.5

 Hispanic origin

Civilian labor force .............................. 14,474 14,896 15,566 15,667 15,663 15,784 15,967 401

Participation rate ............................ 67.8 67.9 68.6 68.6 68.0 68.0 68.2 –.4

Employed ......................................... 13,413 13,994 14,697 14,708 14,665 14,777 14,776 79

Employment-population ratio ......... 62.8 63.8 64.8 64.4 63.7 63.6 63.1 –1.7

Unemployed .................................... 1,061 902 869 959 997 1,007 1,191 322

Unemployment rate ....................... 7.3 6.1 5.6 6.1 6.4 6.4 7.5 1.9

NOTE: Detail for race and Hispanic-origin groups will not sum to totals

because data for the “other races” group are not presented and Hispanics

are included in both the white and black population groups.

SOURCE: Bureau of Labor Statistics, Current Population Survey.

Employment status of the civilian noninstitutional population 16 years and older, by selected characteristics,

quarterly averages, seasonally adjusted, 1998–2001

Characteristic Fourth

quarter

Change

fourth quarter

2000

to

fourth quarter

2001

Third

quarter

Second

quarter

First

quarter

Fourth quarter 2001

1998 1999 2000

[In thousands]
Monthly Labor Review February 2002 17

All families ........................................... 70,343 71,548 71,875 71,856 71,858 72,087 71,991 116

With unemployed adults1 .................. 3,211 3,013 2,938 3,733 3,515 3,852 4,259 1,321

Percent .......................................... 4.6 4.2 4.1 5.2 4.9 5.3 5.9 1.8

Married-couple families ....................... 53,836 54,525 54,631 54,748 54,863 54,548 54,444 –187

With unemployed adults1 .................. 2,031 1,944 1,880 2,421 2,282 2,496 2,788 908

Percent .......................................... 3.8 3.6 3.4 4.4 4.2 4.6 5.1 1.7

Families maintained by women ........... 12,400 12,848 12,927 12,692 12,657 13,126 12,959 32

With unemployed adults1 .................. 882 834 799 967 923 1,013 1,062 263

Percent .......................................... 7.1 6.5 6.2 7.6 7.3 7.7 8.2 2.0

Families maintained by men ............... 4,107 4,176 4,317 4,416 4,339 4,414 4,588 271

With unemployed adults1 .................. 297 235 259 344 310 343 407 148

Percent .......................................... 7.2 5.6 6.0 7.8 7.1 7.8 8.9 2.9

1 Persons aged 20 years and older.

SOURCE: Bureau of Labor Statistics, Current Population Survey.

Table 3. Employment status of adults in families, quarterly averages, not seasonally adjusted, 1998–2001

Characteristic Fourth

quarter

Change

fourth quarter

2000

to

fourth quarter

2001

Third

quarter

Second

quarter

First

quarter

Fourth quarter 2001

1998 1999 2000

[In thousands]

SOURCE: Bureau of Labor Statistics, Current Population Survey.

 Total, 16 years and older ........................... 132,578 134,534 135,865 134,497 –1,368

Executive, administrative, and managerial ................ 19,496 19,700 19,732 20,250 518

Professional specialty ................................................. 20,420 21,156 21,464 21,794 330

Technicians and related support ................................ 4,163 4,442 4,382 4,416 34

Sales occupations ...................................................... 16,107 16,427 16,571 15,926 –645

Administrative support including clerical .................... 18,276 18,456 18,805 18,345 –460

Service occupations ................................................... 17,838 17,525 18,336 18,305 –31

Precision production, craft and repair ........................ 14,398 14,894 14,932 14,683 –249

Operators, fabricators, and laborers .......................... 18,475 18,678 18,496 17,632 –864

Farming, forestry, and fishing ..................................... 3,405 3,255 3,146 3,147 1

[In thousands]

Occupational group

Table 4. Employed persons by occupational group, quarterly averages, not seasonally adjusted, 1998–2001

Fourth

quarter

1998

Fourth

quarter

1999

Fourth

quarter

2000

Change

fourth quarter

2000

to

fourth quarter

2001

Fourth

quarter

2001

Employment declined across a wide range of occupational

groups, although the steepest declines reflected the job losses

in manufacturing-related fields. There was a marked employment decline among operators, fabricators, and laborers

in 2001, as well as a smaller decline in the precision production, craft, and repair field. (See table 4.) These workers are

highly concentrated in the manufacturing industry, and job

losses in these fields reflect the large losses among factory

workers during the year. Sales occupations and service occupations showed employment losses as well, mirroring the

weakness in the services and retail trade industries. There was

also a decline in employment in administrative support (including clerical) occupations. Employment in the other major occupational fields continued to rise, although the pace of

job growth in many areas slowed considerably from that of

2000.

Major occupation-industry pairs can be divided into three

groups based on earnings—the lowest, middle, and highest.
18 Monthly Labor Review February 2002

U.S. labor market, 2001

 Reason for unemployment

Job losers and persons

who completed temporary jobs ........ 2,809 2,495 2,508 2,871 3,134 3,442 4,430 1,922

On temporary layoff ....................... 857 817 881 980 1,023 1,068 1,184 303

Not on temporary layoff ................. 1,952 1,677 1,628 1,891 2,111 2,374 3,246 1,618

Job leavers .......................................... 707 802 772 810 800 829 879 107

Reentrants ........................................... 2,100 1,984 1,899 1,910 1,913 2,071 2,224 325

New entrants ........................................ 518 468 433 412 464 465 486 53

 Duration of unemployment

Less than 5 weeks ............................... 2,648 2,593 2,497 2,693 2,782 2,802 3,066 569

5 to 14 weeks ...................................... 1,906 1,748 1,772 1,881 2,032 2,229 2,606 834

15 weeks and over .............................. 1,567 1,383 1,306 1,444 1,527 1,778 2,256 950

15 to 26 weeks ................................. 728 691 689 767 829 1,004 1,213 524

27 weeks and over ........................... 839 692 617 677 698 774 1,044 427

Average (mean) duration, in weeks .... 14.1 13.0 12.4 12.7 12.6 13.1 14.0 1.6

Median duration, in weeks ................... 6.4 6.1 6.0 6.1 6.2 6.9 7.7 1.7

SOURCE: Bureau of Labor Statistics, Current Population Survey.

Table 5. Unemployed persons by reason for and duration of unemployment, quarterly averages,

seasonally adjusted, 1998–2001

Reason and duration

Fourth

quarter

Change

fourth quarter

2000

to

fourth quarter

2001

Third

quarter

Second

quarter

First

quarter

2001

Fourth

quarter

1998

Fourth

quarter

1999

Fourth

quarter

2000

[In thousands]

U-1 Persons unemployed 15 weeks or longer,

as a percent of the civilian labor force ...................... 1.1 0.9 0.9 1.1 1.1 1.2 1.5 0.6

U-2 Job losers and persons who completed

temporary jobs, as a percent of the civilian

labor force .................................................................. 1.9 1.7 1.7 2.4 2.1 2.3 2.9 1.2

U-3 Total unemployed, as a percent of the civilian

labor force (official unemployment rate)................ 4.1 3.8 3.7 4.6 4.4 4.8 5.2 1.5

U-4 Total unemployed plus discouraged workers,

as a percent of the civilian labor force

plus discouraged workers ......................................... 4.4 4.0 3.9 4.8 4.6 5.0 5.5 1.6

U-5 Total unemployed, plus discouraged workers,

plus all other marginally attached workers,

as a percent of the civilian labor force plus

all marginally attached workers ................................. 5.0 4.6 4.4 5.4 5.1 5.7 6.1 1.7

U-6 Total unemployed, plus all marginally attached

workers, plus total employed part time for economic

reasons, as a percent of the civilian labor force

plus all marginally attached workers ......................... 7.3 6.8 6.6 7.9 7.5 8.2 9.0 2.4

SOURCE: Bureau of Labor Statistics, Current Population Survey.

Table 6. Range of alternative measures of labor underutilization, quarterly averages, not seasonally adjusted,

1998–2001

Measure

Fourth

quarter

Change

fourth quarter

2000

to

fourth quarter

2001

Third

quarter

Second

quarter

First

quarter

2001

Fourth

quarter

1998

Fourth

quarter

1999

Fourth

quarter

2000
Monthly Labor Review February 2002 19

Chart 5. Employment growth by earnings group, seasonally adjusted, quarterly averages, 1996–2001

Tracking the changes in employment for the three earnings

groups provides additional insight into the nature of recent

weakness in the job market. 64 Employment in the middle earnings group fared the worst among the three groups in 2001,

declining by more than 1.3 million over the year. (See chart

5.) Much of the decline in the middle earnings group can be

linked to substantial job losses among operators, fabricators,

and laborers in the Nation’s factories, as well as among skilled

production workers and clerical personnel in manufacturing.

Employment in the highest earnings group has trended upward in recent years, but this pattern reversed in the second

half of 2001, as employment fell by 500,000. The deepening

recession in manufacturing may have contributed to this decline as well, as managers in manufacturing experienced some

of the sharpest job losses among the occupation-industry categories in this group. Employment in the lowest earnings

group showed no clear trend in 2001.

Increases in unemployment were concentrated among persons who had lost their jobs and did not expect to be recalled.

As is typical during a slowdown, much of the unemployment

increase in 2001 was composed of those persons who had

recently lost jobs, rather than those who had voluntarily left

jobs, or who were recent entrants to the workforce. The number of persons who were unemployed because they had lost

their jobs rose by nearly 1.9 million in 2001, to 4.4 million.

(See table 5.) There are two major subcategories of this

group—those on temporary layoff (expecting recall) and those

whose job loss was thought to be permanent (did not expect

recall). The vast majority of the increase occurred in the latter category, which rose by 1.6 million persons over the year.

The increase among those who expected recall was approximately 300,000. (The number of the unemployed who were

reentrants or new entrants, rose by nearly 400,000 in 2001, to

more than 2.7 million.65 The number of unemployed persons

who had voluntarily left their last job also increased slightly.)

At the beginning of an economic slowdown, typically, there

is a disproportionate increase in the number of unemployed

people who have been jobless for fewer than 5 weeks. This

pattern occurred in 2001, but as the year unfolded, the increase in joblessness spread across all duration groups, as

workers found it harder to secure employment and, thus, remained unemployed for longer periods.66 Over the year, 24

percent of the increase in unemployment was among those

unemployed fewer than 5 weeks. (See table 5.) Those unemployed 5 to 14 weeks, represented 35 percent of the overall

increase in unemployment, and 40 percent of the increase was

among those unemployed 15 weeks and more.67 Nearly half

40,000

42,000

44,000

46,000

48,000

50,000

40,000

42,000

44,000

46,000

48,000

50,000

1996 1997 1998 1999 2000 2001

Highest earnings group

Lowest earnings group

Middle earnings group

Source: Bureau of Labor Statistics, Current Population Survey
20 Monthly Labor Review February 2002

U.S. labor market, 2001

1994 .............. 124,450 5,898 7,412 13,310

1995 .............. 125,221 5,714 7,392 13,106

1996 .............. 127,840 5,274 7,173 12,447

1997 .............. 130,504 4,797 6,413 11,210

1998 .............. 132,302 4,662 6,138 10,800

1999 .............. 134,292 4,376 5,744 10,120

2000 .............. 135,649 4,394 5,609 10,003

2001 .............. 134,308 4,677 7,983 12,660

NOTE: In general, the pool of available workers comprises those people

who are not in the labor force, but who “want a job,” and the unemployed.

This concept was first proposed by the Board of Governors of the Federal

Reserve System, in an attempt to quantify available labor sources.

SOURCE: Bureau of Labor Statistics, Current Population Survey.

Table 7. The “pool of available workers,” fourth quarter,

seasonally adjusted, 1994–2001

Fourth quarter

Pool of

available

workers

Unemployed

Not in labor

force, want

a job

Total

employment

[In thousands]

of the increase occurred among those out of work for 6 months

or more.

Alternative measures of labor underutilization provide additional insight into the recession’s effects on the job market.

Although the official unemployment rate is the most widely

used measure for evaluating the degree to which labor resources are not being utilized, BLS has developed a range of

indicators to supplement the jobless rate, called alternative

measures of labor underutilization. (Table 6 displays the

trends in alternative measures U1–U6 in 2001.)68

The official unemployment rate is U-3, and its rise during

the year is closely mirrored by each of the other alternative

measures. Alternative measures U-4 through U-6 are inclusive of a wider range of persons facing labor market difficulties than the group captured by the unemployment rate alone.

Alternative measure U-4 adds persons classified as “discouraged” to the number of unemployed persons. The increase in

the measure U-4 was roughly in line with the rise in the official jobless rate.69

The alternative measure that takes into account all “marginally attached” workers is U-5.70 Compared with U-4, this

broader group includes the discouraged, as well as those who

are not currently looking for work for reasons other than discouragement, such as transportation or child-care problems.

The U-5 indicator rose at a marginally slower pace than the

official unemployment rate rose over the year.

The broadest of these alternative indicators, U-6, adds to

the calculation a group considered to be “underemployed.”

This indicator represents the number of unemployed persons,

plus all “marginally attached” workers (including discouraged

workers), and all persons employed part time for economic

reasons, as a percent of the sum of the labor force and all

marginally attached workers.71 Some part-time employees

would prefer to work full time but are unable to do so because

of slack business conditions, seasonal declines in demand, or

other difficulty in finding full-time work. By including this

group, often labeled “persons employed part time for economic reasons,” the indicator U-6 treats some part-time workers on an equal basis with the unemployed. Persons who

worked part time for economic reasons totaled more than 4

million persons in the fourth quarter of 2001, having increased

by approximately 1 million workers, or 32 percent over the

year. This was somewhat slower than the increase in the number of unemployed persons. The U-6 indicator rose by 2.4

percentage points in 2001, to 9 percent.

Labor market concerns: unease over potential labor market

tightness quickly evaporated as unemployment rose from historically low levels. Throughout the course of the recordbreaking expansion of the 1990s, employment rose rapidly.

At the same time, unemployment rates fell to levels not seen

since the late 1960s. During periods of economic growth,

employers look first to readily available sources of labor. The

most prominent of these—the unemployed—was pushed to

exceptionally low levels by the year 2000, and employers were

forced to look hard for potential workers.72

There are many potential sources of labor other than the

unemployed. One of the main sources of potential labor is

population growth.73 Much of this population growth is the

result of immigration, and in recent years, the foreign-born

population has accounted for an increasingly large share of

U.S. population growth.74

The labor supply also can be expanded by an influx of

persons who previously were not in the labor force. One group

of potential workers that can be easily identified with CPS data

is people who are not currently in the labor force, but claim to

want a job, although they are not actively searching for one.

The sum of these people—referred to simply as those who

“want a job”—and those who are officially unemployed has

been called the “pool of available workers.” This unofficial

measure is sometimes used to gauge changes in the potential

labor supply.75 During the expansion, the pool of available

workers declined steadily. In the fourth quarter of 1994, this

pool numbered nearly 13.3 million people.76 (See table 7.)

By the fourth quarter 2000, it was down to approximately 10

million. Much of the decrease in this group reflected a decline in the number of unemployed workers who likely found

work, but many new workers were probably drawn from outside the labor force, including some who had probably come

from the “want a job” category. Between the fourth quarter
Monthly Labor Review February 2002 21

 Total, 16 years and older........................................... $576 $597 3.6

Executive, administrative, and managerial occupations ..................... 840 867 3.2

Professional specialty occupations ..................................................... 832 854 2.6

Technicians and related support ......................................................... 648 673 3.9

Sales occupations ............................................................................... 550 574 4.4

Administrative support, including clerical ............................................ 469 486 3.6

Private household workers .................................................................. 264 255 –3.4

Protective service occupations ............................................................ 623 629 1.0

Service, except private household and protective .............................. 327 349 6.7

Precision production, craft, and repair ................................................ 613 629 2.6

Machine operators, assemblers, and inspectors ................................ 436 457 4.8

Transportation and material moving occupations ............................... 540 573 6.1

Handlers, equipment cleaners, helpers, and laborers ........................ 378 389 2.9

Farming, forestry, and fishing occupations ......................................... 334 354 6.0

Men ...................................................................................................... 646 672 4.0

Women ................................................................................................. 491 511 4.1

White .................................................................................................... 591 612 3.6

Men ................................................................................................... 669 694 3.7

Women ............................................................................................. 500 521 4.2

Black .................................................................................................... 468 487 4.1

Men ................................................................................................... 503 518 3.0

Women ............................................................................................. 429 451 5.1

Hispanic origin ..................................................................................... 396 414 4.5

Men ................................................................................................... 414 438 5.8

Women ............................................................................................. 364 385 5.8

Educational attainment:

Less than a high school diploma ...................................................... 360 378 5.0

High school graduates, no college ................................................... 506 520 2.8

Some college or associate degree ................................................... 598 621 3.8

College graduates, total ................................................................... 896 924 3.1

NOTE: Earnings figures by educational attainment pertain to persons age 25 and older.

SOURCE: Bureau of Labor Statistics, Current Population Survey.

Table 8. Median usual weekly earnings of full-time wage and salary workers by selected characteristics,

annual averages, 2000–01

Characteristic

Percent

change,

2000–01

2001 2000

of 1994 and the fourth quarter of 2000, this category declined

by more than 1.5 million people.

The recession that began in 2001 significantly eased any

tightness existing in the labor market. These recessionary labor market conditions were reflected not only in the rising

number of unemployed persons, but also in the increases in

other groups who had been sources of labor during the expansion, such as those outside the labor force. From the fourth

quarter of 2000 to the fourth quarter of 2001, the pool of available workers rose to 12.6 million people, an increase of nearly

2.7 million. This increase reflects a net gain of almost 2.4

million in the number of unemployed persons and an increase

of nearly 300,000 among those out of the labor force who

indicated that they want a job. The tight labor market at the

end of the 1990s expansion led some employers facing labor

shortages to encourage people who were not in the labor force

to take jobs. The ensuing slowdown in 2001 quickly eased

the pressure on labor supply—indeed, labor “surpluses” soon

replaced labor shortages as a concern among policymakers.

Earnings growth slowed in most occupations. Throughout

much of the 1990s expansion, real earnings increased for most

major worker groups.77 That trend continued for most worker

groups in 2001, but earnings gains for several groups slowed

and were eroded by inflation. Overall, the median weekly

earnings of full-time wage and salary workers rose 3.6 percent, from $576 per week in 2000, to $597 per week in 2001.

This was somewhat ahead of the 2.8 percent increase in the

Consumer Price Index for All Urban Consumers (CPI-U).

The rise in earnings for all major occupation groups was

lower in 2000–01 than in 1999–2000. The change in earnings

became negative for private household workers, as their me-
22 Monthly Labor Review February 2002

U.S. labor market, 2001

Northeast region ............................................................ 3.8 3.7 4.1 4.4 4.8 1.0

New England division ................................................. 2.5 2.6 3.2 3.8 4.0 1.5

Middle Atlantic division ............................................... 4.3 4.2 4.4 4.6 5.2 .9

Midwest region .............................................................. 3.6 4.0 4.2 4.3 4.8 1.2

East North Central division ......................................... 3.8 4.3 4.5 4.7 5.2 1.4

West North Central division ........................................ 3.2 3.3 3.5 3.5 3.9 .7

South region .................................................................. 3.8 4.0 4.2 4.4 5.1 1.3

South Atlantic division ................................................ 3.5 3.7 4.0 4.2 4.9 1.4

East South Central division ........................................ 4.4 4.5 4.5 4.6 5.3 .9

West South Central division ....................................... 4.1 4.1 4.5 4.8 5.4 1.3

West region .................................................................... 4.5 4.5 4.8 5.1 5.9 1.4

Mountain division ........................................................ 3.7 3.9 4.1 4.3 5.2 1.5

Pacific division ............................................................ 4.8 4.7 5.1 5.4 6.2 1.4

NOTE: Data for 2001 have not been benchmarked.

SOURCE: Bureau of Labor Statistics, Local Area Unemployment Statistics program.

Table 9. Unemployment rates for regions and divisions, quarterly averages, seasonally adjusted, 2000–01

Region and division Fourth

quarter

Over-theyear

change Third

quarter

Second

quarter

First

quarter

2001

Fourth

quarter,

2000

dian usual weekly earnings fell 3.4 percent before accounting

for inflation. (See table 8.) Other occupations—protective service occupations, professional specialty occupations and precision production, craft, and repair—showed small nominal

gains, some of which were largely or completely negated by

inflation. Most occupations did have real earnings growth,

however. Machine operators, assemblers, and inspectors were

among the occupational groups with real earnings growth, a

finding that seems to run counter to the employment trends

within this occupation group and its related industries, manufacturing in particular. This apparent incongruity most likely

reflected job losses that were more heavily concentrated

among the mid- to low-wage workers within these occupations, resulting in a higher “median” wage for the workers

who remained.

Men’s and women’s median weekly earnings both increased by similar proportions between 2000 and 2001, rising to $672 and $511 per week respectively. As a result, the

women’s-to-men’s earnings ratio held steady at 76 percent.

The women’s-to-men’s earnings ratio has not increased much

in recent years, although it is up substantially from 62.5 percent in 1979.78 It is important to remember that many possible factors may underlie the disparity between the earnings

of men and women, for example, differences in work schedules, educational attainment, length of experience in the

workforce, occupational and industry makeup of each group,

and discrimination.

Workers with less than a high school diploma had a nominal gain of 5 percentage points, the largest gain of the four

main educational categories. This is consistent with this

group’s gains during the latter part of the 1990s expansion.

Earnings for persons with some college or an associate degree increased by 3.8 percentage points, and college graduates had nominal earnings increases of approximately 3

percentage points. The earnings increase among high school

graduates with no college education was the lowest of the

educational groups at 2.8 percentage points, which was just

enough to keep pace with inflation.

The proportion of hourly paid workers with hourly earnings that were at or below the prevailing Federal minimum

wage of $5.15 per hour decreased by 0.6 percentage point

over the year to 3.1 percent. In 2001, women were more likely

than men to be earning the minimum wage or less—4 percent

of hourly paid women, compared with 2.2 percent of hourly

paid men. This gap closed a bit over the year, as the decrease

in the proportion of women earning the minimum wage or

less was greater than the decrease among men in this group.

Unemployment in subnational areas: rising unemployment

plagued most areas of the country in 2001. Unemployment

rates rose in each of the four census regions in 2001, with

increases ranging from 1.0 to 1.4 percentage points.79 (See

table 9.) In 2000, joblessness had declined in all four regions.

In fact, unemployment rates in the Midwest, South, and West

fell to historical lows at the end of 2000.80 The Northeast

jobless rate continued to decline into the first quarter of 2001,

establishing a new low and briefly displacing the Midwest

rate as the lowest among census regions for the first time in
Monthly Labor Review February 2002 23

The Local Area Unemployment Statistics (LAUS) program

uses a variety of methodologies to produce monthly estimates of civilian labor force, employment, unemployment,

and unemployment rate for areas below the national level,

including census regions and divisions, the States and the

District of Columbia, and metropolitan areas. The same

concepts that are used in the Current Population Survey

(CPS) for the Nation as a whole are applied in the LAUS

methodologies, so that data are comparable across geographic levels.

The LAUS methodologies vary by the availability of inputs, which tends to reflect differences in geographic

level. A signal-plus-noise modeling approach is used for

areas where data from the CPS can reliably serve as inputs. Model-based areas include the States and the District of Columbia. Estimates for regions and divisions are

aggregated from the model-based estimates for their constituent states. Due to the methodological differences, estimates for regions and divisions may not sum to those for

the United States. Metropolitan area estimates are developed through a “building block” approach called the

Handbook method and controlled to State totals. Both the

model and Handbook approaches incorporate administrative data from the State Unemployment Insurance (UI) systems and establishment payroll data produced by other

BLS programs.

 Local Area Unemployment Statistics

11 years.

Unemployment rates in the Midwest and the South began

to climb in the first quarter of 2001. The Midwest—where

the downturn in manufacturing was particularly acute due to

its high proportion of factory jobs—was the first region to

experience a substantial decline in total nonfarm employment

during the year. The South, on the other hand, was the last

region to post significant job losses, showing resilience until

late in the year. The persistence of employment strength in

the South was due largely to job growth in the services industry division.

Joblessness in the Northeast and West began to move

steadily upward in the second quarter. Both regions were

eliminating jobs at least as quickly as the Midwest by the

fourth quarter of 2001. Part of the Northeast’s sharp job loss

stemmed from an atypical decline in finance, insurance, and

real estate, attributable at least in part to the destruction of the

World Trade Center and surrounding area in New York City

on September 11. The West, which had been adding jobs at

the quickest clip before the onset of the recession, experienced a drastic deceleration from employment growth to contraction in the third quarter. The relatively low proportion of

factory jobs in the West probably insulated the region from

the initial wave of employment declines.

By the fourth quarter of 2001, the Northeast, Midwest, and

South registered jobless rates of close to 5 percent. The West’s

unemployment rate, at nearly 6 percent, continued to be the

highest among census regions, as it has been for each quarter

in the last 9 years.

Geographic divisions within the four regions. All geographic

divisions experienced rising unemployment rates over the

year, albeit with considerably more variation than at the regional level. The New England rate, which had been very low

leading into the current recession, and the Mountain division

rate each climbed 1.5 percentage points. Three other divisions followed closely with rate increases of 1.4 percentage

points apiece. At the other end of the spectrum, the unemployment rate in the West North Central division rose by only 0.7

percentage point.

The East North Central—most heavily reliant on manufacturing employment among geographic divisions—was the first

to experience a substantial over-the-quarter jump in its unemployment rate (0.5 percentage point), in the first quarter of

2001. By contrast, more than half of the over-the-year increases in the jobless rates of the East South Central (0.7 percentage point), Middle Atlantic (0.6 point), Mountain (0.9

point), Pacific (0.8 point), and West North Central (0.4 point)

divisions came in the fourth quarter of 2001.

The variation of unemployment rate rises between the fourth

quarter of 2000 and the fourth quarter of 2001 was generally

wider within regions than between them. In the Northeast, the

dramatic increase in unemployment in New England was tempered by a much smaller increase in the Middle Atlantic. In

the Midwest, the jobless rate in the East North Central division rose by twice as much as that of the West North Central.

Also within the South, substantial increases in the South Atlantic and West South Central division rates contrasted with

the relatively smaller rise in the East South Central rate. The

West region was exceptional in that its two constituent divisions—the Pacific and the Mountain—reported virtually identical rises in joblessness.

New England reported the lowest unemployment rate

among geographic divisions between the first quarter of 2000
24 Monthly Labor Review February 2002

U.S. labor market, 2001

Over-the-year change in unemployment rates by State,

fourth quarter 2000 to fourth quarter 2001, seasonally adjusted

and the second quarter of 2001. This was the first period in a

decade that a division other than the West North Central reported the lowest rate. In the third quarter of 2001, however,

the lowest rate distinction reverted to the West North Central

division, as the New England rate rose by a substantial 0.6

percentage point from the previous quarter. The Pacific continued to report the highest divisional rate throughout this

period, as it has for 10 consecutive years.

States. Unemployment rates rose in 44 States and the District

of Columbia. (See map.) There were increases of at least a

full percentage point in 26 States. Of these, 8 each were located in the South and West, and 5 each were in the Midwest

and Northeast.

The most marked unemployment rate rise, 2.7 percentage

points, occurred in Oregon, which also experienced the sharpest over-the-year decline in total nonfarm employment. The

State reported substantial job losses in all major industry

groups except finance, insurance, and real estate and government. The severity of the construction downturn in Oregon

since the end of 2000 was unusual, as that industry was uncharacteristically resilient throughout much of the rest of the

country.

Unemployment rates were also up a sharp 2.1 percentage

NOTE: Data for 2001 have not been benchmarked.

SOURCE: Bureau of Labor Statistics, Local Area Unemployment Statistics program.

Pacific

West

South Central

East

South Central

South

Atlantic

Middle

Atlantic

New

England East

North Central

West

North Central Mountain

1.6 points or more

1.1 to 1.5 points

0.6 to 1.0 point

0.1 to 0.5 point

0.0 point or less
Monthly Labor Review February 2002 25

Atlanta, GA ................................................................................. 2.6 –0.4 4.0 1.4

Baltimore, MD ............................................................................. 4.1 .3 4.7 .6

Bergen-Passaic, NJ .................................................................... 3.5 –.5 4.7 1.2

Boston, MA-NH ........................................................................... 1.8 –.7 3.6 1.8

Buffalo-Niagara Falls, NY ........................................................... 4.8 .1 5.2 .4

Charlotte-Gastonia-Rock Hill, NC-SC ........................................ 3.6 1.0 5.2 1.6

Chicago, IL.................................................................................. 4.0 .1 5.5 1.5

Cincinnati, OH-KY-IN .................................................................. 3.3 –.1 3.9 .6

Cleveland-Lorain-Elyria, OH ...................................................... 4.0 –.3 5.1 1.1

Columbus, OH ............................................................................ 2.3 –.1 3.1 .8

Dallas, TX ................................................................................... 2.7 –.2 5.6 2.9

Denver, CO ................................................................................. 2.0 –.2 4.5 2.5

Detroit, MI ................................................................................... 3.0 .2 5.0 2.0

Fort Lauderdale, FL .................................................................... 3.5 –.3 5.7 2.2

Fort Worth-Arlington, TX ............................................................ 2.8 –.1 4.6 1.8

Greensboro—Winston-Salem—High Point, NC ......................... 3.0 .6 5.2 2.2

Hartford, CT ................................................................................ 1.7 –1.1 3.0 1.3

Houston, TX ................................................................................ 3.4 –.9 4.4 1.0

Indianapolis, IN ........................................................................... 1.9 –.7 3.8 1.9

Kansas City, MO-KS ................................................................... 3.1 .3 4.0 .9

Los Angeles-Long Beach, CA .................................................... 4.9 –.5 5.9 1.0

Memphis, TN-AR-MS ................................................................. 3.9 .3 4.5 .6

Miami, FL .................................................................................... 5.2 0 7.6 2.4

Middlesex-Somerset-Hunterdon, NJ .......................................... 2.5 –.3 3.7 1.2

Milwaukee-Waukesha, WI .......................................................... 3.1 .2 4.5 1.4

Minneapolis-St. Paul, MN-WI ..................................................... 2.3 .1 3.4 1.1

Nassau-Suffolk, NY .................................................................... 2.7 –.4 3.6 .9

New Orleans, LA ........................................................................ 4.9 .7 5.3 .4

New York, NY ............................................................................. 5.0 –.6 6.2 1.2

Newark, NJ ................................................................................. 3.5 –.4 4.7 1.2

Norfolk-Virginia Beach-Newport News, VA-NC ......................... 2.4 –.6 3.6 1.2

Oakland, CA ............................................................................... 2.4 –.4 4.8 2.4

Orange County, CA .................................................................... 2.2 –.2 3.4 1.2

Orlando, FL ................................................................................. 2.5 0 5.0 2.5

Philadelphia, PA-NJ .................................................................... 3.8 0 4.4 .6

Phoenix-Mesa, AZ ...................................................................... 2.5 –.5 4.9 2.4

Pittsburgh, PA ............................................................................. 3.8 .1 4.2 .4

Portland-Vancouver, OR-WA ...................................................... 3.4 –.7 6.8 3.4

Providence-Fall River-Warwick, RI-MA...................................... 3.3 –.6 4.1 .8

Riverside-San Bernardino, CA ................................................... 4.6 0 5.1 .5

Rochester, NY ............................................................................ 3.7 –.3 5.0 1.3

Sacramento, CA ......................................................................... 3.6 0 4.2 .6

Salt Lake City-Ogden, UT .......................................................... 2.9 –.2 4.1 1.2

San Antonio, TX .......................................................................... 3.0 –.1 4.3 1.3

San Diego, CA ............................................................................ 2.7 –.1 3.5 .8

San Francisco, CA ..................................................................... 1.9 –.2 4.6 2.7

San Jose, CA .............................................................................. 1.5 –.9 6.5 5.0

Seattle-Bellevue-Everett, WA ..................................................... 3.5 .1 5.8 2.3

St. Louis, MO-IL .......................................................................... 3.5 .3 4.5 1.0

Tampa-St. Petersburg-Clearwater, FL ....................................... 2.5 –.2 4.0 1.5

Washington, DC-MD-VA-WV ...................................................... 2.2 –.1 3.4 1.2

NOTE: Data for 2001 have not been benchmarked.

SOURCE: Bureau of Labor Statistics, Local Area Unemployment Statistics program.

Table 10. Changes in unemployment rates for select large metropolitan areas, not seasonally adjusted, 2000–01

Metropolitan area

Fourth quarter 2000 Fourth quarter 2001

Unemployment

rate

Unemployment

rate

Over-the-year

change

Over-the-year

change
26 Monthly Labor Review February 2002

U.S. labor market, 2001

Chart 6. Percent distribution of increase in job losers during recessions

points each in Colorado, Indiana, Nevada, North Carolina,

and South Carolina. All of these States except Nevada experienced a contraction in total nonfarm employment. The net

job loss in Colorado could be attributed entirely to the decline in business services. In Indiana, the job losses were

heavily concentrated within durable goods manufacturing.

Most of the rise in the Nevada jobless rate came in the fourth

quarter, concomitant with job losses in industries dependent

on tourism following the terrorist attacks of September 11. In

North Carolina, steep employment declines within manufacturing industries were partially offset by robust growth within

health services and local government. More than half of the

net employment decline in South Carolina was in textile mill

products within nondurable goods manufacturing.

Only 5 States experienced unemployment rate declines over

the year, with the largest of these in West Virginia (–1.1 percentage points) and Delaware (–0.8 point). Alaska and Montana were the only States to report increases in total nonfarm

employment in addition to declining jobless rates from the

fourth quarter of 2001. Additionally, Wyoming, the only State

posting no net change in joblessness over the year, had one of

the strongest employment advances among States.

Two Pacific States—Oregon and Washington—recorded

the highest unemployment rates, 7.1 and 7.0 percent, respectively, in the fourth quarter of 2001. The deterioration of both

unemployment and employment in Oregon has been noted. In

Washington, job losses were relatively less severe and not as

widespread across industries. Nevada and the District of Columbia followed with unemployment rates of 6.5 and 6.3 percent, respectively.

North Dakota posted the lowest unemployment rate among

States in the fourth quarter of 2001, 2.4 percent, well below

that of the next lowest, South Dakota, 3.1 percent. Joblessness was down slightly over the year in the former, while up

somewhat in the latter. Both States experienced contractions

in total nonfarm employment. Of the 4 additional States that

registered unemployment rates of less than 3.5 percent in the

fourth quarter, 2 also were located in the West North Central

division.

Metropolitan areas. All of the 51 metropolitan areas with a

1990 census population of 1 million or more saw their unemployment rates move upward in 2001.81 (See table 10.) The

most marked increase over the year occurred in San Jose,

CA—5 percentage points to 6.5 percent. Weakness in business services, which accounted for 16.4 percent of the area’s

payroll jobs in the fourth quarter of 2000, was felt acutely in

this area. In Portland-Vancouver, OR-WA, where payroll

employment declines were relatively widespread across industries, joblessness doubled to a rate of 6.8 percent. Eleven

additional areas experienced increases of at least 2 percentage points. Buffalo-Niagara Falls, NY, New Orleans, LA, and

Pittsburgh, PA, were the least impacted by rising joblessness,

recording increases of only 0.4 percentage point apiece.

In the fourth quarter of 2001, Miami, FL, registered the

highest unemployment rate among the large metropolitan

areas, 7.6 percent, followed by Portland-Vancouver, OR-WA

(6.8 percent). San Jose, CA, had the third highest unemployNOTE: Data are quarterly.

SOURCE: Bureau of Labor Statistics, Current Population Survey

Average for the initial three quarters of

the four recessions prior to the

downturn of the early 1990s

Early 1990s recession,

initial three quarters

2001 recession, first

three quarters

On temporary layoff

Not on temporary layoff
Monthly Labor Review February 2002 27

ment rate (6.5 percent). This represented a marked departure

from the metropolitan area unemployment situation in the

fourth quarter of 2000, during which San Jose posted the lowest large area rate. Fifteen additional areas reported rates of 5

percent or more. Hartford, CT, and Columbus, OH, recorded

the lowest rates, 3 and 3.1 percent, respectively. Both of these

areas include the capital cities of their respective States, which

tends to correlate with below-average unemployment. Another

13 additional areas recorded unemployment rates of 4 percent or less.

Comparison with earlier recessions. It often helps, in an

effort to gain perspective on the current economic situation,

to look at the past performance of the economy during similar

phases of the business cycle. The last downturn in the

economy occurred in the early 1990s. A comparison between

the beginning of that period and the last three quarters of 2001

reveals some of the similarities and dissimilarities between

the two recessionary periods.82

Between the second quarter 1990 and the first quarter 1991,

the unemployment rate increased from 5.3 percent to 6.6 percent. This 1.3 percentage point increase is roughly in line with

the 1.4 percentage point rise in joblessness in the final three

quarters of 2001, although the recent increase was proportionately larger. As is typical during a recession, the increase

in unemployment over both periods was concentrated among

persons with job loss as the reason for their unemployment.

While job losers represented 47.8 percent of the unemployed

in the first quarter of 2001, by the end of 2001, this group

rose to 55.2 percent. The following tabulation shows the percent who were unemployed by reason for unemployment for

selected years, quarterly averages, seasonally adjusted. Data

are from the Current Population Survey:

1990 1991 2001 2001

 II I I IV

 Total .................. 100.0 100.0 100.0 100.0

Job losers.................. 47.2 53.8 47.8 55.2

Job leavers ................ 15.3 12.5 13.5 11.0

Reentrants................. 27.7 24.9 31.8 27.7

New entrants............. 9.8 8.8 6.9 6.1

The remaining groups—job leavers, reentrants, and new

entrants—all decreased in relative size. As noted earlier, the

job loser group can be broken down into two subcategories—

those on temporary layoff expecting recall, and those who

have permanently lost jobs. In recessions prior to 1990, the

proportion of the rise in job losers who had lost their jobs

permanently was typically only slightly larger than that attributed to those on temporary layoff. The recession of the

early 1990s was the first exception to this pattern, with the

portion of the increase in job losers belonging to those not on

temporary layoff being more than twice the size of the portion ascribed to those on temporary layoff. (See chart 6.) Over

the year in 2001, this same pattern emerged, with the disparity becoming even more exaggerated than in the early 1990s.

The employment-population ratio dropped 1.1 percentage

points at the beginning of the 1990s recession. It dropped by

a similar amount in 2001, falling to 63.1 percent at the end of

the year. The following tabulation shows employment-population ratios for selected years, quarterly averages, seasonally

adjusted. Data are from the Current Population Survey:

1990 1991 2001 2001

 II I I IV

 Total ............................... 63.0 61.9 64.4 63.1

Men, 20 years

 and older ........................... 74.5 73.1 73.7 72.6

Women, 20 years

 and older ............................ 55.3 54.7 58.9 57.9

Both sexes, aged 16 to 19 ...... 46.2 42.9 44.3 41.4

White ...................................... 63.8 62.8 64.9 63.8

Black ...................................... 57.3 55.8 60.5 58.7

Hispanic origin ...................... 62.3 60.1 64.4 63.1

 While the proportional decline in the employment-population ratio for adult men (1.9 percent) was much greater than

the proportional fall for adult women (1.1 percent) in the early

1990s, the declines were close in proportional size in 2001.

The decline was milder in 2001 for teen workers. Hispanic

workers showed the greatest proportional decline in employment-population ratio in the early 1990s recession, followed

by blacks, then whites. In the first three quarters of the 2001

downturn, this ratio declined proportionally the most for black

workers, followed by Hispanics, then whites.

The group of persons who work part time for economic

reasons is a measure of labor underutilization (described earlier.) Although these people are not unemployed, measuring

the changes in this group can provide a gauge of “time-related” underemployment.83 The number of workers in this

group normally increases during a recession, and the period

between the second quarter 1990 and first quarter 1991 was

no exception. In 2001, there was also an increase in those

working part time for economic reasons, but the percent increase in 2001 was substantially larger than it was in the early

1990s.84

During the downturn that began in 2001, unemployment

rate escalation was geographically widespread. This was also

the case in the 1990–91 recession. One distinguishing feature

of unemployment in the current downturn, as compared with

the prior one, is that unemployment in 2001, began to rise

from markedly lower rates. In fact, unemployment rates were

 Characteristic

Reason
28 Monthly Labor Review February 2002

U.S. labor market, 2001

Table 11. Comparison of employment changes during the 1990–91 recession and the first three quarters

of the 2001 recession, seasonally adjusted, quarterly averages

Industry

(In thousands)

Total nonfarm .................................. 109,719 108,530 132,559 131,502 –1,189 –1.1 –1,057 –0.8

Total private ................................. 91,261 90,198 111,886 110,480 –1,063 –1.2 –1,406 –1.3

Mining .......................................... 711 710 554 567 –1 –0.1 13 2.3

Construction ................................ 5,179 4,783 6,878 6,850 –396 –7.6 –28 –.4

General building contractors ...... 1,322 1,186 1,548 1,559 –136 –10.3 11 .7

Heavy construction, except

 building .................................... 770 738 930 939 –32 –4.2 9 1.0

Special trade contractors ........... 3,087 2,859 4,400 4,352 –228 –7.4 –48 –1.1

Manufacturing1 ............................. 19,187 18,561 18,188 17,174 –626 –3.3 –1,014 –5.6

Durable goods1 .......................... 11,199 10,701 10,990 10,252 –498 –4.4 –738 –6.7

Industrial machinery and

 equipment .............................. 2,102 2,048 2,102 1,918 –54 –2.6 –184 –8.8

Electronic and other electrical

 equipment .............................. 1,686 1,618 1,725 1,501 –68 –4.0 –224 –13.0

Electronic components and

 accessories .......................... 585 569 709 592 –16 –2.7 –117 –16.5

Transportation equipment1 ....... 2,021 1,889 1,778 1,704 –132 –6.5 –74 –4.2

Motor vehicles and

 equipment ............................ 835 755 958 903 –80 –9.6 –55 –5.7

Aircraft and parts .................... 717 690 464 455 –27 –3.8 –9 –1.9

Nondurable goods ...................... 7,988 7,859 7,199 6,922 –129 –1.6 –277 –3.8

Service-producing ...................... 84,643 84,477 106,938 106,912 –166 –.2 –26 0

Transportation and public

 utilities1 .................................. 5,781 5,781 7,119 6,962 0 0 –157 –2.2

Transportation ......................... 3,513 3,513 4,587 4,425 0 0 –162 –3.5

Transportation by air ............. 969 975 1,315 1,228 6 .6 –87 –6.6

Communications and public

 utilities .................................. 2,268 2,268 2,531 2,537 0 0 6 .2

Wholesale trade ....................... 6,177 6,107 7,066 6,948 –70 –1.1 –118 –1.7

Retail trade ............................... 19,630 19,374 23,448 23,404 –256 –1.3 –44 –0.2

Finance, insurance,

 and real estate ....................... 6,708 6,702 7,607 7,633 –6 –.1 26 .3

Finance ................................... 3,276 3,223 3,747 3,767 –53 –1.6 20 .5

Insurance ................................ 2,116 2,169 2,350 2,356 53 2.5 6 .3

Real estate .............................. 1,316 1,310 1,510 1,509 –6 –.5 –1 –.1

Services1 ................................... 27,889 28,181 41,026 40,942 292 1.0 –84 –.2

Hotels and other lodging

 places ................................... 1,633 1,605 1,956 1,852 –28 –1.7 –104 –5.3

Business services1 .................. 5,158 5,071 9,854 9,389 –87 –1.7 –465 –4.7

Services to buildings ............. 810 800 1,007 994 –10 –1.2 –13 –1.3

Personnel supply services ...... 1,543 1,470 3,735 3,302 –73 –4.7 –433 –11.6

Help supply services ............. 1,292 1,253 3,335 2,936 –39 –3.0 –399 –12.0

Computer and data

 processing services ............ 771 785 2,186 2,193 14 1.8 7 .3

Government .............................. 18,459 18,332 20,673 21,022 –127 –.7 349 1.7

Federal .................................... 3,281 2,951 2,614 2,615 –330 –10.1 1 .0

State government ................... 4,294 4,358 4,820 4,922 64 1.5 102 2.1

State government

 education ............................ 1,725 1,758 2,044 2,111 33 1.9 67 3.3

Local government ................... 10,883 11,023 13,239 13,485 140 1.3 246 1.9

Local government

 education ............................ 6,019 6,105 7,480 7,627 86 1.4 147 2.0

Second

quarter

1990

First

quarter

1991

First

quarter

2001

First quarter 2001

to fourth quarter 2001

Second quarter 1990

to first quarter 1991

Thousands Percent Thousands Percent

Fourth

quarter

2001

1Includes other industries not shown separately.

NOTE: December figures are preliminary.
Monthly Labor Review February 2002 29

still lower in most parts of the country in the fourth quarter of

2001 than they were in the second quarter of 1990. The Midwest posted the smallest rate increase from the first to fourth

quarter of 2001, 0.8 percentage point, while the largest jump,

1.4 percentage points, was recorded in the West. From the second quarter of 1990 to the first quarter of 1991, regional unemployment rate increases ranged from a low of 0.9 percentage point—once again in the Midwest—to a high of 1.7

points in the Northeast.

Among geographic divisions, the Pacific experienced the

sharpest upturn in unemployment from the first quarter of

2001, 1.5 percentage points, compared to a relatively steeper

2.4-point increase in New England during the 1990–91 recession. The Pacific’s unemployment rate rises were similar over

the two periods. In New England, however, the rise of 1.4 percentage points over the current period was well below that of

the previous recession. While the Pacific increase in 2001 was

accompanied by relatively modest job losses, the New England

increase in 1990–91 was associated with a severe decline in

total nonfarm employment. New England’s job count, at just

over 6.4 million in the second quarter of 1990, would hit bottom slightly below six million in the first quarter of 1992 and

not rebound to its pre-recession peak until the fourth quarter

of 1997. The West South Central and Mountain were the only

divisions where unemployment rates climbed more rapidly

during the current downturn than the previous one.

There were unemployment rate increases in 45 States and

the District of Columbia in 2001, about the same number as in

the early 1990s. Rates in several States responded very differently in 2001, however. Most notably, the Delaware unemployment rate fell by 0.5 percentage point from the first to

fourth quarter of 2001, but rose by 2.8 points during the 1990–

91 recession. Similarly, the West Virginia rate fell by 0.8 percentage point in 2001, but jumped by 2.1 points over the 1990–

91 period. In contrast, the jobless measure in Colorado climbed

2.0 percentage points over the current period, having dropped

by 0.5 point over the previous one.

Total nonfarm employment contracted in 36 States between

the first and fourth quarter of 2001, compared with 30 States

and the District of Columbia during the last recession. In Indiana—the State with the highest proportion of total nonfarm

employment in manufacturing—the unemployment rate rose

twice as much over the current period as during the 1990–91

recession. During the initial quarter of the recessionary period

in 2001, the steepest unemployment rate increases occurred in

States with relatively high concentrations of manufacturing

employment (0.8 percentage point each in Michigan and Wisconsin, followed by 0.5 point each in Alabama, Illinois, North

Carolina, and South Carolina). This contrasted with the first

quarter of the 1990–91 recession, during which the largest rate

increases were registered for areas with relatively low proportions of their employment in manufacturing (0.6 percentage

point in the District of Columbia and 0.5 point each in Idaho,

Massachusetts, and New Hampshire).

Total private employment (as measured by the establishment survey) peaked as the recession began and fell by 1.3

percent, or 1.4 million jobs, over the three following quarters.

That rate about matched that of the 1990–91 recession. (See

table 11.) Yet, such similarity masked important differences

between these two downturns. In 2001, even more than in the

prior recession, manufacturing dominated—accounting for

72.1 percent of the employment decline, versus 58.9 percent

in 1990–91.

The upswing in information technology manufacturing (especially semiconductors) turned into massive layoffs in 2001,

with the slump extending into wholesale trade and computer

and data processing services. The falling output of IT goods

also forced a cutback in investment in new production capacity—a trend that became generalized in manufacturing and

led to significant job losses in industrial machinery. As the

resulting recession in manufacturing deepened, so did the layoffs of temporary help workers. Indeed, the economy’s increased dependency on temporary help came more evident

because of these layoffs, which (unlike in 1990) began well

before the peak in nonfarm employment.

The decline in travel-dependent industries, whose situation worsened after the September 11th terrorist attacks, further distinguishes the 2001 downturn from that of 1990. Most

notable were the layoffs in air transportation and hotels and

other lodging places, both of which had been experiencing

slackening business travel since early in the year. The terrorist attacks also hurt consumer confidence, and, hence, retail

sales.

Despite the aftereffects of the terrorist attacks, consumption generally held up better in 2001 than in the 1990–91 recession. As a result, household spending softened job losses

throughout retail trade, while home buying slowed any cyclical downswing in construction and real estate employment.

Indeed, employment continued to rise, albeit at a very slow

pace, in residential building. That growth contrasts starkly

with the 70,000 jobs lost during the 1990–91 recession. Special trades contractors also benefited from the new home construction activity. The industry’s job losses totaled 45,000 over

the first three quarters of the recession, approximately onefifth the decline seen during the prior recession. In construction and in the rest of the economy, consumers helped mitigate the effects of the downturn, as steady personal consumption helped compensate for falling business investment.

THE LABOR MARKET WEAKENED CONSIDERABLY IN 2001. Employment fell and unemployment rose, as the economy entered a

recession. Following an extended period of low unemploy-
30 Monthly Labor Review February 2002

U.S. labor market, 2001

Notes

1

 Recessions are determined by the National Bureau of Economic

Research. See details at http://www.nber.org/cycles/november2001/

recessnov.html (visited January 2002).

2

 On September 11, 2001, terrorists attacked three locations in the

United States. Terrorist pilots hijacked commercial jetliners and crashed

them into each of the twin towers of the World Trade Center in New

York City, and into the Pentagon, in Arlington, Virginia. The hijacking

attempt of a fourth jetliner was aborted in a field in Pennsylvania.

3

 The Federal Reserve publishes estimates of industrial production,

which are available online at http://www.federalreserve.gov/releases/

G17/. The Census Bureau produces data on manufacturing inventories

and publishes them online at http://www.census.gov/indicator/www/

m3/index.html (visited January 2002).

4

 Car and light truck inventory data are produced by the Automotive

News Data Center. Data are available on a subscription basis.

5

 Karen Lundegaard, “Delphi Automotive to Trim Work Force by

5%,” Wall Street Journal, Mar. 30, 2001; Rhoda Miel, “Despite record

auto sales, industry cuts jobs,” Automotive News, Nov. 19, 2001; Amy

Wilson, “Suppliers strain to make a profit,” Automotive News, Oct.

15, 2001.

6

 Auto-related manufacturing industries include automotive and apparel trimmings (SIC 2396); flat glass (SIC 3211); automobile stampings

(SIC 3465); carburetors, pistons, rings, valves (SIC 3592); vehicular

lighting equipment (SIC 3647); engine electrical equipment (SIC 3694).

7

 The twelve European Union member states initially participating

in the Euro are Austria, Belgium, France, Finland, Germany, Greece,

Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain. For

more information, see the European Central Bank’s Euro information

website at http://www.euro.ecb.int (visited February 2002.) Overall

exchange rates as measured by the Federal Reserve’s price-adjusted

broad dollar index, available online at http://www.federalreserve.gov/

releases/H10/Summary (visited January 2002). Also, see “The

greenback’s charm,” The Economist, July 14, 2001, pp. 67–68.

8

 Steel prices as measured by the commodity Producer Price Index

for Iron and Steel, available online at http://www.bls.gov/ppi.

9

 “Smeltdown: steel producers,” The Economist, Oct. 20, 2001, pp.

62–65.

10 The review is documented at http://www.usitc.gov/steel (visited

January 2002).

11 Caroline Miller, “Big paper cuts,” Printing Impressions, June 2001.

12 Trade data by SIC is available from the U.S. International Trade

Commission’s interactive tariff and trade dataweb, http://

dataweb.usitc.gov.

13 “Media companies: sucked into quicksand,” The Economist, Oct.

27, 2001, pp. 59–60.

14 Data on before tax profits from National Income and Product Accounts produced by the U.S. Bureau of Economic Analysis http://

www.bea.doc.gov (visited January 2002).

15 “Business: The jobs challenge,” The Economist, July 14, 2001,

pp. 56–57; “Business: Where did all the money go?” The Economist,

June 23, 2001, pp. 55–56.

16 Data on shipments are produced by the U.S. Census Bureau at

http://www.census.gov/indicator/www/m3/index.html (visited January 2002). Data on exports by SIC comes from the U.S. International

Trade Commissions’ dataweb, http://dataweb.usitc.gov (visited January 2002).

17 Together Taiwan and South Korea accounted for 31.4 percent of

total special industrial machinery exports in 2000.

18 These industries are computers and office equipment (SIC 357),

communications equipment (SIC 366), and electronic components and

accessories (SIC 367), which is principally semiconductor manufacturing. New orders for information technology goods are produced by

the Census Bureau.

19 Jerry Knight, “Telecoms are Hurting and Their Suppliers Feel the

Pain,” The Washington Post, Oct. 30, 2000.

20 “More time with the family,” The Economist, Apr. 28, 2001, pp.

78–79.

21 See, for example, the August 2001 Federal Reserve Beige Book.

It is published online at http://www.federalreserve.gov/FOMC/

BeigeBook/2001/ (visited January 2002).

22 Jennifer R. Martel and David S. Langdon, “The job market in

2001,” Monthly Labor Review, February 2001, pp. 3–30.

23 Truck tonnage data is published by the American Trucking Association, online at http://www.truckline.com (visited January 2002).

24 Data from input-output tables produced by BLS Employment Projections Program, available online at http://www.bls.gov/emp/

empind3.htm (visited January 2002).

ment rates, in 2001, there were sizeable increases in the unemployment rates of all major groups. The pace of job growth

in most major occupational fields slowed considerably from

that of 2000, including employment declines in many occupations, especially those concentrated in the manufacturing

and services and retail trade industries. Earnings growth also

slowed over the year.

Nonfarm payroll employment fell by 762,000 in 2001,

dominated by layoffs in manufacturing and in personnel supply services. Construction and retail sales experienced small

employment gains for the year, as a result of hiring early in

the year, which somewhat outweighed the small employment

declines that occurred after the March 2001 start of the recession. The September 11th terrorist attacks hurt an already

weakened travel industry and contributed to large-scale layoffs in airlines and hotels. Health services and higher education, in contrast, accelerated their hiring in 2001, adding more

than 400,000 workers.
Monthly Labor Review February 2002 31

25 Marcelo Estevao and Saul Lach estimated that the temporary help

workers in the manufacturing workforce rose from approximately 1

percent in 1990 to nearly 4 percent in 1997, with high-tech industries

(defined as SIC 35 and SIC 36, excluding SIC 363) reaching nearly 6

percent. Marcelo Estevao and Saul Lach, “The Evolution of the Demand for Temporary Help Supply Employment in the United States,”

NBER working paper, December 1999. Also see “Just-in-time inventories and labor: a study of two industries, 1990–98,” Chapter 1, 1999

Report on the American Workforce (Washington, Bureau of Labor Statistics).

26 Comparison of Personnel Supply (SIC 736) with all 2-digit industries.

27 Data are from the input-output tables produced by BLS Employment Projections program.

28 Ibid.

29 Construction-related manufacturing industries include various 4-

digit industries within lumber products; stone, clay, and glass products; fabricated metals; rubber and other plastic products; and chemicals.

30 See the archived Weekly Weather and Crop Bulletins prepared by

the U.S. Department of Agriculture, available online at http://

www.usda.gov/oce/waob/jawf/wwcb.html (visited February 2002).

31 Construction activity is measured by its value put in place. These

data are produced by the U.S. Census Bureau and are available online

at http://www.census.gov/const/www/c30index.html (visited January 2002).

32 Debra K. Rubin, and others, “TEA-21: Road and Rail Funding’s

New Stake,” Engineering News Record, Aug. 6, 2001, pp. 32–37.

Review the FY 2000 data; FY 2001, http://www.fhwa.dot.gov/tea21/

table11_part4.htm (visited January 2002).

33 The value of construction put-in-place statistics are produced by

the U.S. Census Bureau and are available online at http://

www.census.gov/const/www/c30index.html (visited January 2002).

34 Ibid.

35 Monthly mortgage rates are published by the Federal Reserve online

at http://www.federalreserve.gov/releases/G13/ (visited January

2002). The Conference Board produces the Index of consumer confidence and published it monthly at http://www.conferenceboard.org

(visited January 2002).

36 Affordability as measured the National Association of Realtors’

housing affordability indices, available online at http://nar.realtor.org

(visited February 2002).

37 See, for example, “La-Z-Boy Profit Falls 80%,” New York Times

(Reuters), Aug. 15, 2001.

38 Kim Kennedy, “Furniture industry drags despite strong housing,”

Facilities Design & Management, Aug. 2001. Mary Ellen Lloyd, “Furniture sellers begin to rethink strategy,” Wall Street Journal, Sept. 11,

2000. Leslie Kaufman, “Bankruptcies defy growth in furniture,” New

York Times, Aug. 18, 2000.

39 Year-over-year percent change of the mortgage refinancing index

published by the Mortgage Bankers Association of America, http://

www.mbaa.org (visited January 2002).

40 Jonathan Fuerbringer, “During a bear market, there’s no place

like home,” New York Times, Aug. 16, 2001. Stephane Fitch and Brandon Copple, “What if housing crashed?” Forbes, Sept. 3, 2001, pp.

76–80.

41 The comparisons are based on preliminary December retail sales

estimates, which are produced by the U.S. Census Bureau, and are

available online at http://www.census.gov/econ/www/retmenu.html

(visited February 2002). The industry definitions follow the 1997 North

American Industrial Classification System.

42 Ibid.

43 “Nightmare on Fifth Avenue: American retailers,” The Economist, Oct. 6, 2001, pp. 58–61. Martha McNeil Hamilton, “Retail sales

slowed in September; some chains hit hard; discounters post gains,”

The Washington Post, Oct. 12, 2001.

44 Devon Spurgeon, “Albertson’s to Cut Staff by 15% to 20%, Close or

Sell 165 Underperforming Stores,” Wall Street Journal, July 18, 2001.

45 Tom Weir, “Retail overstock,” Supermarket Business, Oct. 15,

2001, pp. 1, 6, and 8.

46 Figures from 2001 Auto Data, published by the National Automobile Dealers Association and available online at http://

www.nada.org/Content/NavigationMenu/MediaCenter/

NADAData/NADAData.htm (visited January 2002).

47 Sholnn Freeman, “Big Auto Makers Brace for Waves of Used

Cars,” Wall Street Journal, Aug. 7, 2001; Micheline Maynard, “Why

Dealers are Putting a New Shine on Used Cars,” New York Times, Apr.

15, 2001.

48 Michael Arndt and Williams Symonds, “Suddenly, Carriers Can’t

Get off the Ground,” Business Week, Sept. 3, 2001, p. 36; Joan Feldman;

“The going gets tough,” Air Transport World, May 2001, pp. 72–75.

49 See, for example, the Federal Reserve Beige Book for June 2001

and August 2001, available online at http://www.federalreserve.gov/

FOMC/BeigeBook/2001/ (visited January 2002).

50 Tim O’Brien, and others, “Waterparks: Season in Review,” Amusement Business, Oct. 8, 2001; “Summer summary,” Amusement Business, Sept. 10, 2001, pp. 18, 20.

51 This comparison excludes the August 1997 strike in air transportation.

52 Michael Mecham, and others, “Manufacturers’ Layoffs Could

Reach 100,000,” Aviation Week and Space Technology, Oct. 1, 2001,

p. 43; “Airbus Gloomy Over Economy,” Professional Engineering,

Aug. 15, 2001, p. 10.

53 J. Lynn Lunsford, “Boeing Raises Estimated Deliveries for ’01,

Foresees Sharper Production Drop in ’02,” Wall Street Journal, Oct.

18, 2001.

54 William Goodman, “Employment in services industries affected

by recessions and expansions,” Monthly Labor Review, October 2001,

pp. 3–11.

55 “Better late than never,” Modern Healthcare, Jan. 1, 2001, p. 14.

56 See, for example, the “Frequently asked questions” section about

the Producer Price Index at http://www.bls.gov/ppi/ppifaq.htm (visited January 2002).

57 The Producer Price Indices are published by BLS and are available on the Internet at http://www.bls.gov/ppi.
32 Monthly Labor Review February 2002

U.S. labor market, 2001

58 The enrollment projections are published in Chapter 3 of the U.S.

Department of Education’s Digest of Education Statistics, 2000, which

is available online at http://nces.ed.gov/pubs2001/digest/ch3.html#1

(visited January 2002).

59 The 2001 annual average labor force participation rate of teenagers, at 50 percent, was the lowest annual rate since 1971.

60 Labor force participation among teenagers also fell sharply during the recessions of the early 1980s and 1990s. In contrast to movements in previous expansions, during the subsequent expansions of the

1980s and 1990s, teenage participation in the labor force never fully

recovered to prerecession levels.

61 Persons 20 years of age and older are referred to as adults.

62 A family is defined as a group of two or more persons residing

together who are related by birth, marriage, or adoption; all such persons are considered as members of one family. Families discussed in

this section do not necessarily include children younger than 18. Persons 20 years of age and older are referred to as adults.

63 The family unemployment rates refer to the proportion of families

with an unemployed adult.

64 For a more detailed description of this methodology, see Randy E.

Ilg, “The nature of employment growth, 1989-95,” Monthly Labor

Review, June 1996, pp. 29–36. Following methods employed earlier

by Ilg, major occupation-industry pairs (such as professionals in manufacturing) were ranked in descending order by their median weekly

earnings in 1996. The categories were then divided into three groups—

highest, middle, and lowest earnings—each of which accounted for

approximately one-third of employment in 1996. An employment time

series for each occupation-industry category from January 1996 through

December 2001 was developed, and data for the job categories were

sorted into the appropriate earnings groups. The monthly time-series

data that were used were independently seasonally adjusted and do not

sum to the total-employment figures.

65 Reentrants are persons who previously worked but were out of the

labor force prior to beginning their job search. New entrants are persons who never worked before and who are entering the labor force for

the first time.

66 During a recession, an increase in those unemployed more than 5

weeks naturally follows an initial increase in the newly unemployed,

as those who were unemployed early into the slowdown find it increasingly difficult to find a job.

67 Numbers do not sum to 100 due to rounding.

68 For additional information, see John E. Bregger and Steven E.

Haugen, “BLS introduces new range of alternative unemployment measures,” Monthly Labor Review, October 1995, pp. 19–26. Two of the

alternative measures, U-1 and U-2, are excluded from the analysis in

this paper because they focus on duration of unemployment and reasons for unemployment; issues that have been discussed earlier. Data,

as discussed in this section, are not seasonally adjusted.

69 Discouraged workers are persons not in the labor force who want and

are available for a job and who have looked for work sometime in the past

12 months (or since the end of their last job if they held one within

the past 12 months), but are not currently looking, because they

believe there are no jobs available or there are none for which they

qualify.

70 Marginally attached workers are persons who wanted and were

available for work and had looked for a job sometime in the prior 12

months but were not counted as unemployed because they had not actively searched for work in the 4 weeks preceding the survey. Discouraged workers are a subset of marginally attached workers.

71 Part-time workers are persons working 1 to 34 hours per week.

72 See Deborah Feyerick, “Tight Labor Market Holds Risks For

Economy,” CNN.com, February 4, 2000, available on the Internet at

http://europe.cnn.com/2000/US/02/04/labor.shortage/ (visited January 2002). Also see Steve Bills, “Retailers Scramble for help,”

CNN.com, November 24, 2000, available on the Internet at http://

money.cnn.com/2000/11/24/people/retail_jobs/ (visited January

2002).

73 Population growth in this section refers to growth in the civilian

noninstitutional population age 16 years or older.

74 For a discussion of potential sources of labor, see Jennifer L. Martel

and David S. Langdon, “The job market in 2000: slowing down as the

year ended,” Monthly Labor Review, February 2001, pp. 15–16.

75 The Board of Governors of the Federal Reserve System, for example, tracks changes in the pool of available workers to help evaluate

labor supply conditions. One example is its “Monetary Policy Report

to the Congress,” February 17, 2000, available on the Internet at http:/

/www.federalreserve.gov/boarddocs/hh/2000/February/

Testimony.htm (visited February 2002).

76 Strictly comparable data on those not in the labor force, but who

want a job, are not available for years prior to 1994.

77 The data in this section of the article are annual averages.

78 These data were first available in 1979.

79 The four regions and nine divisions are composed of the following entities: Northeast: New England division—Connecticut, Maine,

Massachusetts, New Hampshire, Rhode Island, Vermont; Middle Atlantic division—New Jersey, New York, Pennsylvania; Midwest: East

North Central division—Illinois, Indiana, Michigan, Ohio, Wisconsin; West North Central division—Iowa, Kansas, Minnesota, Missouri,

Nebraska, North Dakota, South Dakota; South: South Atlantic division—Delaware, District of Columbia, Florida, Georgia, Maryland,

North Carolina, South Carolina, Virginia, West Virginia; East South

Central division—Alabama, Kentucky, Mississippi, Tennessee; West

South Central division—Arkansas, Louisiana, Oklahoma, Texas; West:

Mountain division—Arizona, Colorado, Idaho, Montana, Nevada, New

Mexico, Utah, Wyoming; Pacific division—Alaska, California, Hawaii, Oregon, Washington.

80 Monthly series for the West region, the Pacific division, and California begin in 1980. Series for other regions, divisions, and States

begin in 1978.

81 Neither unemployment nor payroll employment data are available

on a seasonally adjusted basis for metropolitan areas. The metropolitan area data presented here are not seasonally adjusted quarterly data,

which preclude analysis of over-the-quarter changes.

82 The National Bureau of Economic Research, the official arbiter of

business cycle peaks and troughs, determined that a business cycle

peak was reached in July 1990. Likewise, a peak was officially recognized to have been reached in March 2001. This section investigates

some of the effects of the three quarters of recession in 2001, by com-
Monthly Labor Review February 2002 33

paring and contrasting them with the first three quarters of the recession in the early 1990s.

83 Formerly referred to by the International Labor Organization as

“visible” underemployment, time-related underemployment (as it is now

known) “exists when the hours of work of an employed person are

insufficient in relation to an alternative employment situation in which

the person is willing and available to engage.” For further discussion

of this concept, see International Labour Office, “Bulletin of Labour

Statistics,” (February 1998-4.)

84 Due to the CPS redesign in 1994, the category “part-time for economic reasons” was redefined, effectively reducing the group of workers included. Adjustment factors were used in order to compare the

results from the two relevant time periods. After adjustment, the increase in those working part time for economic reasons in the early

1990s period was slightly greater than 14 percent, while the increase

in 2001 was around 31 percent. For a description of the effects of the

redesign and the adjustment factors used, see Anne E. Polivka and

Stephen M. Miller, “The CPS After the Redesign: Refocusing the Economic Lens,” U.S. Bureau of Labor Statistics Research Papers, March

1995, pp. 32-34, available on the Internet at http://www.bls.gov/ore/

abstract/ec/ec950090.htm (visited January 2002).

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