Monthly Labor Review July 2006 15

Employment in Current Recovery

Nonfarm jobs are more plentiful, average hourly earnings

continue to rise, but average weekly hours have not recovered

to their prerecession level

Jobs in 2005: How do they compare

with their March 2001 counterparts?

The 2001 recession lasted 8 months, but

nonfarm payroll employment did not

recover to its prerecession level until early

2005.1 In addition, the average workweek remains

shorter than it was at the start of the recession, and

earnings have not outpaced inflation. Based on

these observations, one may ask, “How does the

average job, 4 years after the recession ended

compare, in terms of hours and earnings, to the

average job at the start of the recession?” What

aggregate effect do these jobs have on the

economy? The indexes of aggregate hours and

payrolls provide insight on the differences

between pre- and post-recessionary jobs.

This article highlights employment changes in

each industry sector during the 2001 recession and

subsequent recovery period and compares the

changes with previous recessions and recoveries.

It begins with an examination of employment,

because shifts in employment can impact hours

and earnings. Employers tend to respond quickly

in times of economic downturns by reducing the

average workweek. Each private-sector industry’s

average weekly hours are reviewed to gain insight

into the health of that sector and to explain

movements in the average workweek for all privatesector workers. Next, the article examines aggregate

hours—the product of average weekly hours and

employment. Average hourly earnings typically

grow over time, but the rate of growth fluctuates

with changes in the business cycle. Lastly, the

article looks at the combined product of

employment, hours, and earnings—what is known

as aggregate payrolls.

Employment: the long road to

recovery

At the start of the 2001 recession, employment

behaved in a typical manner, peaking 1 month prior

to the March 2001 business cycle peak. The

recession ended in November 2001. It was not the

longest, nor was it the harshest in terms of overall

economic weakness. From 1969 to 1981, the length

of employment downturns averaged 9 months from

peak to trough. (See table 1.) It then took, on

average, 16 months from the previous peak for

employment to recover to its prerecession level. In

contrast, employment declined for 30 months after

the start of the 2001 recession, and it took 48 months

from the February 2001 peak to fully recover. (See

chart 1.) Even during the so-called “jobless

recovery” of the 1990s, employment recovered in

less time.

The employment picture weakens when

Government jobs are excluded.2

 (See table 2 and

chart 2.) Total private employment peaked in

December 2000 and then declined until July 2003.

During this period of contraction, 3.4 million jobs

disappeared from private payrolls. Private

employment finally recovered in July 2005, four

and a half years after the previous peak.

Manufacturing employment has been trending

downward since 1979, and it has failed to recover

fully after each economic downturn. In addition,

manufacturing employment tends to be more

cyclical than other industries. The Asian financial

crisis erupted in mid-1997 and brought with it

widespread global uncertainty. Asian stock markets,

Julie Hatch Maxfield is

a supervisory

economist in the

Office of Employment

and Unemployment

Statistics, Bureau of

Labor Statistics.

E-mail:

Hatch.Julie@bls.gov

Julie Hatch Maxfield
16 Monthly Labor Review July 2006

Employment in Current Recovery

currencies, and other assets depreciated quickly.3 Against this

backdrop, manufacturers began to lay off people in 1998.4 By

mid-2000, employment losses had plateaued, but since July 2000,

over 3 million jobs have disappeared from payrolls. During the

2001–03 period, displaced manufacturing workers were 60 percent

less likely than other workers to find a new job in any industry,

which further slowed the employment recovery.5

The manufacturing slowdown adversely affected wholesale

trade and transportation and warehousing employment. These

industries rely heavily on the distribution or trans-portation of

U.S. manufactured goods. Both of these industries lost more

jobs, both in relative and absolute terms, during the 2001 recession than their average loss for prior recessions. In addition,

transportation employment fell by almost 125,000 jobs

following the terrorist attacks on September 11, 2001.6 Job

losses did not abate until mid-2003, and employment still

has not fully recovered. Wholesale trade employment

reached its low point at approximately the same time and

was 187,300 jobs short of a full recovery as of December

2005.

Transportation was not the only industry adversely

affected by the terrorist attacks. Leisure and hospitality

experienced employment growth during the first half of

2001, but after September 11, sharp reductions in business

travel and leisure travel adversely affected this industry’s

employment. In June 2002, employment reached a low point:

Leisure quickly recovered in 6 months. Almost a million

jobs were added between June 2002 and December 2005.

 Recovery took longer in professional and business

services, where employment was reduced by 4 percent or

669,000 jobs during the 2001 recession; the industry

typically did not lose jobs during earlier economic

downturns. However, several component industries within

professional and business services experienced job losses

due to a variety of market forces.7 Overall, the industry

stopped shedding jobs at the end of 2002 and employment

recovered by July 2005. The largest employment decline

occurred in temporary help services; employment in this

industry is considered a leading indicator of labor market

robustness. Temporary help allows firms to respond to their

changing employment demands quickly and at a lower cost

than permanent hires. Firms decided to forgo temps in an

unstable business climate, and employment in temporary

help services declined by more than half a million jobs by

April 2003.8

Like professional and business services, the information

industry sustained heavier job losses during the most

recent recession. After manufacturing, the information

industry lost the highest percentage of jobs—5 percent of

its workforce—during the most recent recession. Since the

March 2001 peak, telecommunications employment has

contracted by 25 percent. This weakness, when combined

with job declines elsewhere in the information industry, led

to the loss of 652,000 jobs as of December 2005.

Retail trade employment peaked in December 2000 and

continued to decline for 20 months after the recession

officially ended. Although most retail trade industries shed

jobs, employment rose in building material and garden supply

stores, which benefited from a strong housing market. Retail

started to recover by mid-2003, and the half million jobs

that were lost were almost fully recovered by the end of

2005.

Duration of economic contractions and recoveries, 1969–2001

Duration of contraction (length of

recession, in months):

NBER-designated business cycle1 ....... 11 16 6 16 12 8 8

Total nonfarm employment (peak

to trough).............................................. 8 9 0 17 9 11 30

Total private nonfarm employment

(peak to trough) ................................... 8 10 0 16 9 23 31

Duration of recovery (length of expansion,

 in months):

Total nonfarm employment (trough

to peak) ................................................ 18 19 0 28 16 32 48

Total private nonfarm employment

(trough to peak) ................................... 21 24 0 26 18 38 55

1 As determined by the Business Cycle Dating Committee of the National Bureau of Economic Research (NBER).

1980 1981

Average,

1969–81

 (4 cycles)

1973

Table 1.

1990 2001 1969 Duration
Monthly Labor Review July 2006 17

During the 2001 business contraction, low interest rates

helped shore up employment in both the construction and

financial services industries. Financial activities continued

to add jobs during the recession, which is not unusual for

this industry. On average, construction lost 7.5 percent of

its employment during the recessions since 1969, but in

the most recent recession, it only lost 1.1 percent.9

Construction employment reached a trough in March 2003

after 2 years of declines, but it recovered in 12 months.

In contrast, sectors that typically have problems hiring

workers in a tight labor market benefited from the easing of

labor demand in other industries. Education and health

services and “other services”—repair and maintenance,

personal and laundry services, and membership

associations and organizations—added jobs during the

2001 recession. These industries offer lower paying jobs,

on average; perhaps these jobs became more appealing

when the quantity of jobs available elsewhere diminished.

Although not all industries lost jobs during the 2001

economic downturn, most industries shed jobs quickly in

light of weakening demand for their products and services.

A quick turnaround in employment did not occur as

employers were reluctant to hire workers. Total nonfarm

and total-private employment began to recover in mid-2003,

and by 2005, the current expansion was underway.

Worker hours: diminishing manufacturing

dominance

While employment losses have been recovered, average

weekly hours have trended downward and have remained near

33.7 hours. 10 Average weekly hours tend to lead the business

cycle because businesses usually adjust worker hours before

increasing or decreasing their workforce. Compared with

average changes during the four previous recessions, the

decline in average weekly hours during the most recent two

recessions was not dramatic—shrinking by 0.3 hour.11 (See

table 3.) After bottoming out at the end of the 1991 recession,

average weekly hours recovered in a year’s time. In contrast,

the average workweek still has not recovered to its prerecession peak more than 4 years after the end of the 2001

recession.

Changes in total-private hours are dependent upon

changes in employment by industry and changes in average

weekly hours by industry. When workers who are employed

in industries with higher-than-average workweeks are laid off

disproportionately, all else equal, the loss of their hours applies

downward pressure on the total-private workweek.

Conversely, when workers are laid off in industries with lowerthan-average workweeks, upward pressure is applied to the

total-private average. Finally, if all production workers, on

Chart 1. Nonfarm payroll employment, 12 months prior to and 50 months after the business cycle

peak, seasonally adjusted, indexed to the start of the recession

Thousands

-12 -8 -4 0 4 8 12 16 20 24 28 32 36 40 44 48

96

97

98

99

100

101

102

103

104

105

106

107

108

96

97

98

99

100

101

102

103

104

105

106

107

108

Thousands

1969–81 recessions

1990–91 recession

2001 recession
18 Monthly Labor Review July 2006

Employment in Current Recovery

average, are getting paid for fewer work hours, downward

pressure on total-private hours is applied.

Most industries experienced a decline in their average

workweek during the 2001 recession. Manufacturing’s contribution to total-private average weekly hours has been steadily

declining for decades. In 1969, almost 1 out of every 3 privatesector workers were employed in a manufacturing industry.

During previous recessions, when the factory workweek

declined, the decline greatly affected the topside average

workweek. In contrast, manufacturing represented 15.2

percent of private employment in March 2001. The manufacturing workweek declined by 0.4 hour during the recession,

but it had fallen by an hour prior to the start of the recession

beginning in July 2000. The factory workweek partially

recovered in 2004, but declined again and has been hovering

around 40.7 hours, about the same as at the start of the recession. The lack of recovery in manufacturing employment and

hours continues to exert negative pressure on total-private

average weekly hours.

Employment in professional and business services was

roughly the same size as employment in manufacturing at the

start of the 2001 recession, but the average workweek was 6

hours shorter in the former industry. Average weekly hours in

professional and business services declined by 0.4 hour during

the recession and have been averaging around 34.2 hours since

2001. Employment in this industry recovered in mid-2005. As

employers in the industry began to add jobs, it exerted modest

upward pressure on the overall workweek (because its hours are

slightly higher than the total-private average).

Average weekly hours in transportation and warehousing and

in wholesale trade declined by almost half an hour during the

recession and have yet to recover. Transportation and warehousing average hours peaked in mid-1997 and thereafter fell

by more than 3 hours through the end of the recession.

Wholesale trade’s average weekly hours hovered around 38.5

hours since the early 1980s, before peaking in early 2000,

coincident with an employment peak. The declines and lack

of recovery in employment and hours in both industries

negatively affected total-private average weekly hours.

Average weekly hours in utilities declined by almost 1 hour

during the 2001 recession, the largest drop that occurred in

any sector. However, this industry accounts for one-half of 1

percent of all production workers. Therefore, its impact on the

aggregate number would be minimal.

Not all industries saw a decline in their average workweek

during the 2001 recession. Traditionally, construction hours

move in line with the general economy during periods of

economic contractions, when individuals, governments, and

firms generally have less money to spend on construction

projects. However, while volatile month to month, the

industry’s workweek remained essentially unchanged from

March to November 2001. Low interest rates provided

Jobs lost during recessions, 1969–2001

Total nonfarm ............................................................ –1,471 –1.8 –1,231 –1.1 –1,621 –1.2

Total private .............................................................. –1,744 –2.6 –1,159 –1.3 –2,002 –1.8

Goods-producing ................................................. –1,950 –8.2 –966 –4.1 –1,194 –4.9

Natural resources and mining ......................... –14 –.1 –10 –1.3 –9 –1.5

Construction .................................................... –324 –7.5 –393 –7.5 –78 –1.1

Manufacturing.................................................. –1,613 –8.6 –563 –3.2 –1,107 –6.5

Private service-providing .................................... 206 .6 –193 –.3 –808 –.9

Wholesale trade .............................................. –19 –.3 –72 –1.4 –112 –1.9

Retail trade ...................................................... –8 .0 –229 –1.7 –197 –1.3

Transportation and warehousing ..................... –124 –4.2 –9 –.3 –187 –4.2

Utilities ............................................................ 11 1.8 –4 –.6 0 .0

Information ...................................................... –79 –3.5 –8 –.3 –186 –5.0

Financial activities .......................................... 70 1.7 –26 –.4 50 .6

Professional and business services .............. 62 1.0 –194 –1.8 –669 –4.0

Education and health services ....................... 167 2.9 381 3.5 395 2.6

Leisure and hospitality ................................... 32 .7 –27 –.3 –15 –.1

Other services ................................................ 63 2.8 –4 –.1 113 2.2

Government ......................................................... 273 2.0 –72 –.4 381 1.8

1969–91 recessions

(average) 1990–91 recession 2001 recession

Changes in employment during recessions

Table 2.

Level Percent

Industry

Level Level Percent Percent
Monthly Labor Review July 2006 19

stimulus to the residential housing market. Since its average

hours are higher than the average for all industries,

construction had a positive impact on the total-private

workweek.

Employment in education and health services—the largest

private industry—grew the most during the 2001 recession.

In addition, the industry’s average weekly hours held

constant during the recession and, in fact, have increased

slightly since the end of the recession. This industry’s

average weekly hours are slightly shorter than the total

average, so although jobs were added, they tended to have

shorter hours than the jobs that were lost elsewhere. For every

education and health services job gain that offset a

manufacturing job loss, 8 hours fell from aggregate hours, on

average.12

Average weekly hours in retail trade ticked up during the

most recent recession, slightly out of the norm for this

industry. Declines ranging from two-tenths of an hour to a

half-hour were much more common during earlier recessions.

In fact, average weekly hours have stayed between 30.6 and

31.0 hours with few exceptions for the past 10 years. Retail

hours continue to be lower than the total-private level. Retail

trade lost jobs from December 2000 until July 2003, about the

same rate as the rest of the private sector. Therefore, changing

retail hours had a negligible effect on the total-private

workweek during that time. As retail trade employment

recovered, a downward pressure was applied to total-private

average weekly hours.

In sum, average weekly hours did not fall more than normal

during the 2001 recession compared with earlier recessions;

however, more than 4 years later, the average workweek has

not recovered to its prerecession level. Average hours fell for

all industries during previous recessions, with the

manufacturing workweek always shrinking the most. The 2001

recession represents a departure from trend. In the past, a

swift recovery in manufacturing employment signaled a swift

recovery in total-private average weekly hours. As

manufacturing employment contracts, its relative impact on

hours decreases. Manufacturing employment is still more

than 3 million below its July 2000 peak level. As such, although

manufacturing hours have recovered to March 2001 levels,

the increase has not been enough to help the total-private

workweek recover, because manufacturing carries a much

smaller weight than it did previously, due to the large job

losses in the industry. When industries with shorter-thanaverage workweeks represent a growing share of workers,

then mathematically the total-private average weekly hours

series cannot increase.

Chart 2. Total private payroll employment, 12 months prior to and 50 months after the business cycle

peak, seasonally adjusted, indexed to the start of the recession

Thousands Thousands

-12 -8 -4 0 4 8 12 16 20 24 28 32 36 40 44 48

96

97

98

99

100

101

102

103

104

105

106

107

108

96

97

98

99

100

101

102

103

104

105

106

107

108

1969–81 recessions

1990–91 recession

2001 recession
20 Monthly Labor Review July 2006

Employment in Current Recovery

Fixed-weight hours: changes in industry

mix adversely affect hours

In order to understand how the change in industry composition

impacts average weekly hours, a fixed-weight series was

calculated holding production workers constant while allowing

average weekly hours to change.13 In the early months of 2000,

there was no difference between the published and fixed-weight

hours series, as the industry composition did not change rapidly.

(See chart 3.) By August 2000, however, the published average

weekly hours series had fallen below the fixed-weight hours

series. By mid-2003, the published hours series was three-tenths

of an hour lower than the fixed-weight series. The spread over

time between these series is explained by the changes in the

industry mix; employment in shorter workweek industries grew

relatively faster than longer workweek industries.

Aggregates hours: the product of its

environment

Aggregate hours peaked in October 2000 and continued to

decline until August 2003, shrinking by 5.5 percent.14 (See chart

4.) During the recession, the decline resulted from contractions

in average weekly hours and in employment; however, the

workweek has held fairly steady since the end of the recession,

while the index has continued to decline—mainly because

employment continued to fall until July 2003. Once net job gains

started, a turnaround in aggregate hours became evident.

As 2005 came to a close, the index of aggregate hours was still

just short of its pre-recession peak, but it finally recovered in

early 2006. Employment in leisure and hospitality, the sector with

the shortest workweek, expanded relative to other industries.

(See table 4.) In addition, manufacturing employment continued

to contract. Other industry sectors helped offset these weaknesses. Professional and business services gained the most jobs

after July 2003, while construction and financial activities also

had notable gains in employment. All three industries have longer

average workweeks than all private industries and, therefore,

had a positive impact on aggregate hours. If manufacturing

employment continues on its long-term negative trend, other

industries will have to compensate for aggregate hours to

expand. Some combination of three factors must occur to offset

lost manufacturing hours—employment in industries with higher

average weekly hours must increase, industries with lower hours

must add workers more rapidly; or average weekly hours must

rise among industries.

Payrolls: show me the money

Total-private average hourly earnings reached $16.35 in

December 2005. Hourly earnings have always shown an increase

year to year, although the rate of growth changes over time.

Changes in average weekly hours during recessions, 1969–2001

Total private .............................................................. –.8 –2.1 –.3 –.9 –.3 –.9

Goods-producing ................................................. –1.1 –2.8 –.4 –1.0 –.3 –.7

Natural resources and mining ......................... –1.1 –2.5 .1 .2 –.6 –1.3

Construction .................................................... –.9 –2.2 .1 .3 –.1 –.3

Manufacturing .................................................. –1.2 –2.9 –.6 –1.5 –.4 –1.0

Private service-providing .................................... –.4 –1.2 –.1 –.3 –.2 –.6

Wholesale trade .............................................. –.5 –1.4 .2 .5 –.4 –1.0

Retail trade ...................................................... –.5 –1.5 –.2 –.7 .1 .3

Transportation and warehousing ..................... –.8 –2.0 –.3 –.8 –.5 –1.4

Utilities ............................................................ –.1 –.2 –.1 –.2 –.9 –2.2

Information ...................................................... –.6 –1.6 .1 .3 –.1 –.3

Financial activities .......................................... –.1 –.3 .1 .3 .0 .0

Professional and business services .............. –.3 –.8 .0 .0 –.4 –1.2

Education and health services ....................... –.2 –.5 –.1 –.3 .0 .0

Leisure and hospitality ................................... –.4 –1.2 –.3 –1.2 –.4 –1.6

Other services ................................................ –.2 –.7 –.1 –.3 –.2 –.6

1969–91 recessions

(average) 1990–91 recession 2001 recession

Table 3.

Level Percent

Industry

Level Level Percent Percent
Monthly Labor Review July 2006 21

NOTE: Data are seasonally adjusted. Aggregate weekly hours are the product of average weekly hours and production or

nonsupervisory workers.

Chart 4. Index of total private aggregate weekly hours, 2000–05

Index

2002 = 100

2000 2001 2002 2003 2004 2005

94

96

98

100

102

104

106

94

96

98

100

102

104

106

NOTE: Data are seasonally adjusted. Production workers fixed at January 2000 levels.

Chart 3. Average weekly hours, total private, published and fixed-weight series, 2000–05

Average

weekly hours

Average

weekly hours

2000 2001 2002 2003 2004 2005

33.0

33.5

34.0

34.5

35.0

33.0

33.5

34.0

34.5

35.0

Fixed weight

Published

Index

2002 = 100
22 Monthly Labor Review July 2006

Employment in Current Recovery

Total private ................................................ 2,814 3.2 33.8 0.0 0.0 95,113 3.2 1 100.0

Goods-producing ................................... –621 –3.7 40.2 .4 1.0 –18,201 –2.7 21.1

Natural resources and mining ........... 3,435 4.8 32.4 0.0 0.0 111,294 4.8 2 78.9

Construction ...................................... 34 7.5 45.6 1.3 2.9 2,139 10.7 2 .7

Manufacturing .................................... 396 7.5 38.7 –.1 –.3 14,797 7.2 2 7.1

Private service-providing ...................... –1,051 –9.4 40.8 .7 1.7 –35,059 –7.8 13.3

Wholesale trade ................................ 107 2.4 37.9 –.2 –.5 3,141 1.8 5.6

Retail trade ........................................ 175 1.4 30.5 –.2 –.7 2,758 .7 12.8

Transportation and warehousing ....... 180 5.0 36.7 .3 .8 7,701 5.9 4.5

Utilities .............................................. –34 –7.0 41.4 .5 1.2 –1,158 –5.9 0.6

Information ........................................ –85 –3.4 36.6 –.2 –.5 –3,610 –3.9 2.8

Financial activities ............................ 323 5.5 35.9 .2 .6 12,763 6.1 7.1

Professional and business services .. 827 6.3 34.3 .3 .9 32,331 7.2 2 15.5

Education and health services ......... 1,186 8.4 32.5 .2 .6 41,353 9.1 15.9

Leisure and hospitality ..................... 747 7.0 25.6 .2 .8 21,243 7.9 2 9.4

Other services .................................. 9 0.2 30.9 –1.3 –4 –5,467 –3.8 4.4

Production workers Average weekly hours Aggregate hours

Percent

distribution

December

2005

Percent

change

Industry

Percent

change

Level

change

Level

change

Percent

change

December

2005

level

Level

change

Changes November 2001 (trough) to December 2005

Changes in index of aggregate hours and percentage contribution by industry, 2001 recession and current

expansion

Total private ................................................ –1,679 –1.9 34.1 –.3 –.9 –83,951 –2.7 100.0

Goods-producing ................................... –1,011 –5.6 40.1 –.3 –.7 –45,614 –6.3 22.4

Natural resources and mining ........... –668 –.9 32.6 –.2 –.6 –36,193 –1.5 77.6

Construction ...................................... –5 –1.1 44.9 –.6 –1.3 –496 –2.4 .7

Manufacturing.................................... –94 –1.7 38.9 –.1 –.3 –4,185 –2.0 6.8

Private service-providing ...................... –912 –7.5 40.5 –.4 –1.0 –41,406 –8.5 14.9

Wholesale trade ................................ –72 –1.6 38.5 –.4 –1.0 –4,593 –2.6 5.7

Retail trade ........................................ –176 –1.4 30.6 .1 .3 –4,102 –1.0 13.1

Transportation and warehousing ....... –171 –4.5 36.9 –.5 –1.4 –8,127 –5.8 4.4

Utilities .............................................. 0 –.1 41.8 –.9 –2.2 –452 –2.2 .7

Information ........................................ –72 –2.8 36.9 –.1 –.3 –2,906 –3.1 3.1

Financial activities ............................ 36 .6 35.7 0.0 0.0 1,285 .6 6.9

Professional and business services .. –626 –4.5 34.4 –.4 –1.2 –26,821 –5.6 14.9

Education and health services ......... 354 2.6 32.3 0.0 0.0 11,434 2.6 15.1

Leisure and hospitality ..................... –32 –.3 25.8 –.4 –1.6 –5,065 –1.8 9.0

Other services .................................. 92 2.1 32.4 –.2 –.6 2,097 1.5 4.7

Production workers Average weekly hours Aggregate hours

Changes, peak to trough, March 2001 to November 2001

Table 4.

Percent

distribution

November

2001

Percent

change

Industry

Percent

change

Level

change

Level

change

March 2001

level

Level

change

Percent

change

1Total private returned to its prerecession level in early 2006. 2

Recovered to prerecession level.
Monthly Labor Review July 2006 23

Once inflation is taken into account, the earnings picture changes

considerably. Real average hourly earnings at the end of 2005

were equal to November 2001 levels.15 In order to compare postrecession jobs to the ones existing before the recession, currentdollar and inflation-adjusted earnings must be examined.

During the 2001 recession average hourly earnings increased

by 2 percent—a much slower rate than during previous

recessions. (See table 5.) Inflation played a major role in

dampening earnings growth in the earlier recessions, when real

average hourly earnings actually increased. (See chart 5.) During

the early recessions, nominal earnings increased 5.7 percent, on

average, but after adjusting for inflation average hourly earnings

declined on average by 1.4 percent. In contrast, real average

hourly earnings strength occurred in all supersectors but

wholesale trade during the 2001 recession.

However, real average hourly earnings have declined since

November 2001 in 6 out of the 13 industrial sectors. More striking,

all of the industries with lower-than-average real hourly

earnings—retail trade, leisure and hospitality, and other

services—have experienced net earnings declines since the end

of the recession. In contrast, real hourly earnings in utilities and

information, industries with the highest real average hourly

earnings, have increased by 3.1 percent and 1.7 percent,

respectively, since November 2001. Although total-private real

average hourly earnings are the same as they were at the end of

the recession, lower paying industries have been more adversely

affected than higher paying ones.

Average weekly earnings, the product of average hourly

earnings and average weekly hours, typically increase over time.

During the 2001 recession, weekly earnings edged up 1.2 percent.

However, since the end of the recession, weekly earnings have

increased by more than 11 percent. During the recession, nominal

average weekly earnings actually declined in wholesale trade,

utilities, and leisure and hospitality, which is unusual recessionary behavior in these industries. Declines in the average

workweek in utilities and leisure and hospitality translated into

lower average weekly earnings. Wholesale trade is the only

industry where both average weekly hours and average hourly

earnings actually declined.

Average weekly earnings, adjusted for inflation, edged up

during the recession. However, in the 4 years since the recession

ended, average weekly earnings are virtually unchanged. When

the declines in real average hourly earnings are combined with a

lack of recovery in average weekly hours, some industries’

average weekly earnings have declined more than 2.5 percent

since the start of the recession—“other services” contracted 5.5

percent. Real average weekly earnings did not decline in all

industries since the most recent recession ended. Employment,

hours, and earnings in the financial activities industry have

benefited from low interest rates. Real average weekly earnings

in this industry have grown by 6.0 percent since March 2001. In

contrast, real average weekly earnings in manufacturing, which

has seen large employment declines and a lack of recovery in

hours, experienced a gain of about 3.0 percent.

The change in the industry mix also affects earnings when

average hours and employment change. A fixed-weight average

hourly earnings series was calculated using January 2000’s

aggregate hour levels.16 This allows the study of changes in

earnings without the effects of changes in production workers

or in the average workweek. The fixed-weight earnings series

started to outperform the published series, suggesting that

employment in industries with lower average wages grew relative

to other industries. By 2003, the fixed-weight series was 5 cents

higher, indicating that average earnings weakened partly as a

result of the changing industry mix. That is, employment grew in

industries such as leisure and hospitality, which has the shortest

workweek and the lowest average hourly earnings. These

industries created a drag on average hourly earnings for the

private sector.

Nominal average hourly earnings and average weekly

earnings typically grow over time for all industries. However,

once the earnings are adjusted for inflation, the gains can be

wiped out. Total-private real average hourly and weekly

earnings are not substantially different than they were 4 years

ago. Once the contraction in average weekly hours is

combined with earnings that are not outpacing inflation, some

industries have seen declines of more than 2 percent in their

real average weekly earnings.

Aggregates payrolls: the big picture

Aggregate payrolls provide a broad picture of the overall health

of the economy in terms of worker pay.17 Aggregate payrolls

declined slightly during the 2001 recession. Prior to the 1990-91

recession, aggregate payrolls either grew or stabilized during

tims of economic contractions. During the 2001 recession, dclines

in employment and hours depressed aggregate payrolls.

However, those payrolls quickly recovered due to strength in

average hourly earnings. In 2004 and 2005, aggregate payroll

dollars increased 5.5 percent, the strongest 1-year changes since

1999. This improvement coincided with employment growth.

Real aggregate payrolls are calculated by multiplying real

average weekly earnings by production workers and serve as

a measure of inflation-adjusted payrolls. Total private real

aggregate payrolls reached a high in November 2000 and then

declined until mid-2003, as production worker employment

shrank. (See chart 6.) Typically, real aggregate payrolls decline

faster during economic downturns than they did during the

2001 recession. However, after the 2001 recession ended, real

payrolls continued to decline—a stark contrast to earlier

recessions when thre were quicker turnarounds. Once

employment started to trend up in 2003, real aggregate payrolls

followed suit. A full recovery in real aggregate payrolls

occurred during the first quarter of 2005.
24 Monthly Labor Review July 2006

Employment in Current Recovery

Average change

1969–1991 recessions 2001 recession

Changes in average hourly earnings

Table 5.

Level Percent

Industry

Level Level Percent Percent Level Percent

Average change

1969–1991 recessions

Changes in average hourly earnings, 1982 dollars

2001 recession

Changes in current-dollar and constant-dollar average hourly and weekly earnings, 1969–2001

Total private ................................................ $0.32 5.7 $0.30 2.1 $–.12 –1.4 $0.11 1.4

Goods-producing ................................... .40 6.7 .36 2.3 –.05 –.5 .14 1.6

Natural resources and mining ........... .52 7.7 .29 1.7 .04 .4 .09 1.0

Construction ...................................... .53 7.2 .21 1.2 .00 .0 .05 .5

Manufacturing.................................... .35 6.3 .37 2.5 –.08 –1.0 .15 1.8

Private service-providing ...................... .31 5.6 .30 2.1 –.12 –1.4 .11 1.4

Wholesale trade ................................ .45 6.2 –.01 –.1.0 –.14 –1.4 –.07 –.7

Retail trade ........................................ .25 4.9 .34 3.0 –.19 –2.7 .14 2.2

Transportation and warehousing ....... .39 4.8 .25 1.6 –.31 –2.7 .08 .9

Utilities .............................................. .68 7.3 .44 1.9 –.06 –.4 .16 1.2

Information ........................................ .41 5.0 .35 1.8 –.25 –2.0 .12 1.1

Financial activities ............................ .37 7.2 .31 2.0 –.01 –.1 .12 1.4

Professional and business services .. .36 5.7 .39 2.4 –.14 –1.4 .16 1.8

Education and health services ......... .36 7.2 .44 3.0 –.01 .0 .19 2.3

Leisure and hospitality ..................... .20 6.6 .09 1.1 –.03 –.6 .02 .4

Other services .................................. .34 8.9 .43 3.3 .08 1.7 .19 2.6

Total private ................................................ $7.53 3.7 $5.82 1.2 –$9.79 –3.2 $1.40 .5

Goods-producing ................................... 9.85 4.0 9.64 1.5 –10.63 –3.0 3.02 .9

Natural resources and mining ........... 15.48 5.6 2.74 .4 –7.35 –1.5 –1.32 –.3

Construction ...................................... 16.32 5.3 6.35 .9 –8.08 –1.7 .93 .2

Manufacturing.................................... 7.74 3.4 9.01 1.5 –11.86 –3.5 2.81 .8

Private service-providing ...................... 8.50 4.6 6.91 1.5 –6.89 –2.4 2.14 .8

Wholesale trade ................................ 15.23 5.3 –7.08 –1.1 –8.80 –2.3 –6.37 –1.8

Retail trade ........................................ 5.69 3.5 11.55 3.4 –9.07 –3.9 5.15 2.7

Transportation and warehousing ....... 9.24 3.0 1.49 .3 –19.64 –4.4 –1.28 –.4

Utilities .............................................. 27.66 7.0 –3.05 –.3 –3.79 –.6 –5.37 -1

Information ........................................ 11.55 3.7 10.92 1.5 –14.88 –3.2 3.37 .8

Financial activities ............................ 13.27 6.9 11.06 2.0 –.92 –.2 4.09 1.3

Professional and business services .. 11.33 5.0 6.80 1.2 –6.90 –2.0 1.70 .5

Education and health services ......... 11.14 6.7 14.21 3.0 –1.19 –.4 6.17 2.4

Leisure and hospitality ..................... 4.32 5.3 –1.05 –.5 –2.27 –1.8 –1.39 –1.2

Other services .................................. 10.70 8.3 11.23 2.7 1.63 1.0 4.67 2.0

Average change

1969–1991 recessions 2001 recession

Changes in average weekly earnings

Level Percent

Industry

Level Percent Level Percent Level Percent

Average change

1969–1991 recessions

Changes in average weekly earnings, 1982 dollars

2001 recession
Monthly Labor Review July 2006 25

NOTE: Data seasonally adjusted, March 2001 = 100.

Chart 5. Real earnings indexed to the start of the recession, 2000–05

Index Index

2000 2001 2002 2003 2004 2005

98

99

100

101

102

103

98

99

100

101

102

103

Real average

hourly earnings

Real average

weekly earnings

NOTE: Real aggregate earnings are the product of average weekly earnings and production or nonsupervisory workers, deflated

by the Consumer Price Index for Urban Wage Earners (CPI–W). Data are seasonally adjusted.

Chart 6. Total private real aggregate earnings, 2000–05, seasonally adjusted, in millions of 1982 dollars

Millions

of dollars

Millions

of dollars

April 2005 recovery

2000 2001 2002 2003 2004 2005

$255

$250

$245

$240

$255

$250

$245

$240

November 2000 peak
26 Monthly Labor Review July 2006

Employment in Current Recovery

Hours and earnings in conjunction with employment are

sensitive to changes in the business cycle. Changes in one of

these elements can affect trends in the other elements. While

aggregate payrolls and private employment have made full

recoveries since the 2001 recession, average weekly hours have

not. As the economy exchanged jobs among industries with long

workweeks for ones that had shorter workweeks, a full recovery

in average weekly hours did not occur. Aggregate hours reached

their pre-recession peak in the beginning of 2006, when more

private jobs were being added to payrolls. As 2005 came to an

end, the average postrecession, private-sector, production or

nonsupervisory job had a shorter workweek and did not have

substantially higher real average weekly earnings than the

average job in March 2001. The aggregate impacts of these

postrecession jobs were felt for several years after the

recession ended. Real aggregate payrolls did not make a full

recovery until the beginning of 2005, and aggregate hours

recovered a year later.

Notes

1

 U.S. business cycle expansions and contractions are determined by the

National Bureau of Economic Research (NBER). For information, see

http://www.nber.org/cycles/main.html. Data on employment, hours,

and earnings used in this article are from the Current Employment Statistics

(CES) program, which each month surveys 160,000 nonfarm businesses

representing about 400,000 establishments. For more information on the

CES program’s concepts and methodology, see BLS Handbook of Methods,

Bulletin 2490, (Bureau of Labor Statistics, April 1997). CES data are

available on the Internet at http://www.bls.gov/ces/. Data used in this

paper are seasonally adjusted unless otherwise noted.

2

 The rest of this article concentrates on private employment. For

more information on public employment, see Julie Hatch, “Employment

in the public sector: two recessions’ impact on jobs,” Monthly Labor

Review, October 2004, pp. 38–47.

3

 For more information on the Asian crisis, see http://www.imf.org/

external/np/exr/facts/asia.htm.

4

 For more information about manufacturing employment and the

Asian crisis see Julie Hatch and Angela Clinton, “Job Growth in the 1990s:

a retrospect,” Monthly Labor Review, December 2000, pp. 3–18.

5

 Worker Displacement, 2001–03, USDL 04–1381 (U.S. Department of

Labor), July 30, 2004; on the Internet at www.bls.gov/news.release/

disp.nr0.htm.

6

 The time period examined was September 2001 to January 2002,

when the majority of the declines occurred in transportation and

warehousing.

7

 For more information about business and professional services, see

Rachel Krantz, “Employment in business services: a year of unprecedented

decline,” Monthly Labor Review, April 2002, pp. 17–24.

8 For more information, see Terence M. McMenamin, Rachel

Krantz, and Thomas J. Krolik, “U.S. labor market in 2002: continued

weakness,” Monthly Labor Review, February 2003, pp. 3–25.

9

 For more information on employment trends in the construction

industry, see the forthcoming article in the Monthly Labor Review by

John Mullins.

10 The CES program currently produces hours and earnings for

production or nonsupervisory workers. CES collects data for production

workers in manufacturing and in natural resources and mining industries.

In construction, the term construction workers covers workers, up through

the level of working supervisors, who are engaged directly in a construction

project. For private service-providing industries data are collected for

nonsupervisory workers. Production workers as a percent of all workers

have remained fairly constant over the years. Therefore, production and

nonsupervisory workers trends are assumed to mimic the overall

employment trends in each supersector. For an historical discussion on

the decline in average weekly hours, see Katie Kirkland, “On the decline

in average weekly hours worked,” Monthly Labor Review, July 2000, pp.

26–31. BLS has begun to collect hours and earnings data for all workers

covered by the CES or establishment survey. For more information, see

"Changes to the Current Employment Statistics Survey" webpage at http:/

/www.bls.gov/ces/cesww.htm.

11 Total-private hours and earnings series started in 1964, so recessions

1969 forward are studied.

12 Aggregate hours are the product of production or nonsupervisory

workers and average weekly hours, summed for all industries.

13 Aggregate hours (production workers multiplied by average weekly

hours) were calculated for each industry sector and summed to get monthly

aggregates. Each month’s aggregate hours were divided by the total

production workers for January 2000 to get fixed-weight average weekly

hours for total-private employment.

14 Analysis of aggregate hours is based on the index of aggregate weekly

hours, which uses the annual average 2002 aggregate weekly hours as a

base.

15 Current dollar earnings are deflated by the Consumer Price Index for

Urban Earners and Clerical Workers (CPI-W). For the purpose of the Real

Earnings series, the CPI-W is converted from the base of 1982–84 that is

used in the official, published Consumer Price Index series to a base of

1982. Thus, the constant dollar average hourly and weekly earnings series

are in 1982 dollars.

16 Aggregate payrolls (the product of production workers, average hourly

earnings, and average weekly hours) are calculated for each industry and

summed to get monthly aggregates. Each month’s aggregate payrolls

were divided by the total aggregate hours for January 2000 to get fixedweight average hourly earnings for total-private employment

17 Analysis of aggregate payrolls is based on the index of aggregate

weekly payrolls, which uses the 2002 annual average weekly payrolls as a

base.