Monthly Labor Review • April 2011 3

The 2007–09 Recession: Overview

Employment loss and the 2007–09 

recession: an overview

Christopher J. Goodman 

and

Steven M. Mance

Christopher J. Goodman 

and Steven M. Mance 

are economists 

in the Division of 

Current Employment 

Statistics in the Office 

of Employment and 

Unemployment 

Statistics at the Bureau 

of Labor Statistics. 

Email: goodman.

christopher@bls.gov or 

mance.steven@bls.gov

The downturn in employment accompanying the 2007–09 

recession was notable for its prolonged length, for affecting 

an especially wide range of industries, and for being deeper 

than any other downturn since World War II 

The U.S. economy is recovering from 

one of the longest and deepest recessions since the end of World 

War II (WWII). Virtually no area of the 

economy remained unscathed from the 

December 2007–June 2009 recession,1 particularly the labor market. Nonfarm payroll 

employment, measured by the Current Employment Statistics (CES) program, peaked 

in January 2008, 1 month after the peak in 

the business cycle.2 After relatively modest 

job losses in early 2008, the losses increased 

sharply in the latter half of the year, and 

declines spread beyond traditionally cyclical 

industries. 

The already-weak economy was jolted by 

financial market turmoil in fall 2008. The 

impact on employment was immediate and 

severe, with monthly job losses spiking to 

among the highest on record.3 At its lowest 

point, February 2010, U.S. employment had 

declined by 8.8 million from its prerecession 

peak. (See chart 1.) The breadth and depth 

of the recession, particularly in comparison 

with recent recessions, has led some to label 

it “The Great Recession.”4 In 2010, the labor market stabilized as employment grew 

modestly. Despite recent improvements, the 

labor market continues to struggle from the 

aftermath of a historic employment downturn that is notable for its breadth, depth, 

and length.

Prelude to the recession

The 2007–09 recession was preceded by 

a period of steady economic growth. Although initially slow to recover from a mild 

recession earlier in the decade, the labor 

market was healthy overall by 2006. The 

unemployment rate was low by historical 

standards, and payroll employment was 

steadily expanding.5 There remained a few 

areas of weakness; for example, employment 

in manufacturing and information never returned to prerecession levels. Nonetheless, 

most industries were adding jobs. 

Employment growth before the most 

recent recession was centered in three areas 

of the economy: education, healthcare, and 

various industries related to the housing 

market.6 Education and health care have 

long been growing industries in terms of 

both economic output and employment.7

Industries related to housing market activity have historically been more cyclical.8

 The 

housing market boomed throughout the first 

half of the 2000s as home prices soared and 

construction activity rose to record levels.9

The rapid growth in housing drove economic growth in two ways. First, housing 

construction led to job growth in construction as well as in complementary industries 

such as mortgage finance, real estate, construction-related manufacturing, and retail 
The 2007–09 Recession: Overview

4  Monthly Labor Review • April 2011

furniture stores. Second, the housing boom also contributed to economic growth in a broader sense through a 

positive “wealth effect” that boosted spending across the 

economy.10 According to the Federal Reserve, U.S. households’ aggregate real estate assets rose by over a third 

between 2003 and 2006.11 Homeowners extracted part 

of this increased mortgage equity to fund consumption 

in other areas, such as automobiles and other consumer 

goods. It is estimated that income extraction from housing more than doubled between 2001 and 2005, with over 

$1.4 trillion extracted in 2005 alone.12 By one estimate, 

this housing-fueled spending accounted for at least onequarter of the growth in consumer expenditures.13

Despite the economy’s overall strength, certain segments of it were showing signs of trouble by 2006. The 

housing market, after serving as one of the key drivers 

of growth throughout much of the decade, was cooling 

off. New home sales peaked in July 2005, and by January 2006 housing starts had begun declining.14 Over the 

course of 2007, the housing credit market deteriorated as 

delinquency rates rose and home foreclosures reached levels unseen since recordkeeping began in the late 1970s.15 

The decline in credit quality was most pronounced among 

nontraditional loans such as subprime loans. These nontraditional loans, aimed at borrowers unable to qualify 

for more traditional loans, grew in market share as home 

prices rose and homeownership expanded.16

Initially, the negative impact of housing on the broader 

economy appeared to be relativity contained. Areas outside of housing continued to grow as GDP expanded and 

employment grew steadily throughout 2006. However, 

over the course of 2007, the deepening trouble in housing 

began showing signs of spreading as most major economic 

indicators leveled off or declined outright. The unemployment rate, which had edged downward for several years, 

leveled off in late 2006 and by late 2007 began trending 

up. Nonfarm employment continued to expand throughout 2007, though at a reduced rate. Over the course of 

the year, longstanding job losses in manufacturing were 

joined by deepening job losses in housing-related industries, such as construction and finance. 

Overview of the recession

Weighed down by widespread economic troubles, the 

economy officially entered a recession in December 2007. 

Chart 1. Total nonfarm employment, monthly data, seasonally adjusted, 2000–10

Employment

(in millions)

Employment

(in millions)

140

138

136

134

132

130

128

126

124

122

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

140

138

136

134

132

130

128

126

124

122

NOTE: Shaded areas denote recessions as determined by the National Bureau of Economic Research. 

SOURCE:  Bureau of Labor Statistics, Current Employment Statistics survey.
Monthly Labor Review • April 2011 5

Nonfarm employment peaked in January 2008 and then 

entered a period of steady decline. Losses were heaviest 

in traditionally cyclical industries such as manufacturing 

and construction. However, weakness was not confined to 

these industries: a growing number of traditionally more 

resilient industries such as retail trade and leisure and hospitality reported employment declines.

Rising oil prices, which are often a contributing factor to recessions, further strained the economy in 2008. 

Global crude oil production failed to keep up with demand, causing prices to double from June 2007 to June 

2008.17 For homeowners already feeling the effects of a 

decline in the value of their homes, rising energy costs 

came as an unwelcome development. Personal consumption expenditures began to shrink in the first quarter of 

2008, particularly expenditures on durable goods such as 

autos and appliances—which tend to be highly cyclical.18

The surge in oil and other commodity prices adversely 

affected businesses as well. From July 2007 to July 2008, 

the Producer Price Index (PPI) for all commodities increased by 17.4 percent. This was the highest over-the-year 

percent change in this index since 1974, when oil prices 

surged following a supply reduction by the Organization 

of Arab Petroleum Exporting Countries (OAPEC). This 

oil shock contributed to the 1973–75 recession.19 One industry that was helped by the boom in commodities prices 

was mining, which continued to add jobs through the first 

half of the recession because high prices drove businesses 

to extract resources that had been unprofitable when price 

levels were lower.20 Commodity prices starting dropping 

sharply, however, when the recession turned global and 

world demand fell. From July 2008 to July 2009, 1 month 

after the recession ended, the PPI for all commodities fell 

by 16.1 percent—the steepest 12-month percent decline 

since 1931.

Depth

The 2007–09 recession did not progress evenly. During 

the first 9 months of the recession, nonfarm employment 

decreased by 1.2 percent, a change that fell in line with the 

relatively modest losses of the 1990–91 and 2001 recessions.21 In addition, the distribution of job losses by industry during the early stages of the most recent recession was 

similar to that during the two previous recessions. During 

the first half of the 2007–09 recession and the entirety of 

each of the previous two recessions, a little more than half 

of job losses occurred in manufacturing and construction 

(which both tend to be sensitive to the business cycle).

The shallow employment declines did not last, however. 

The economic downturn intensified in September 2008 

when the economy was jolted by trouble in the Nation’s financial system. In the aftermath of the turmoil, credit markets constricted and banks tightened lending standards.22

The recession rapidly deepened, and job losses spiked.

Monthly job losses averaged 712,000 from October 

2008 through March 2009—the most severe 6-month 

period of job losses since 1945, when WWII was ending. 

During the final 3 months of the recession, April through 

June 2009, job losses remained severe but moderated 

somewhat to an average monthly employment decline of 

516,000. Despite the official end of the recession, nonfarm employment declined by another 1.2 million until 

reaching a trough in February 2010. 

Breadth

The downturn in employment was notable for the breadth 

of industries that were affected. (See table 1.) Many industries that added jobs during the first 9 months of the 

recession began shedding them, and industries that were 

losing jobs began losing them more rapidly. The CES 

1-month diffusion index, a measure of the breadth of employment losses across industries, fell to 17.0 in March 

2009, its lowest level since the series began in 1991.23

Traditionally, goods-producing industries have experienced the largest declines in employment during recessions. 

The 2007–09 recession was no different, with construction 

and manufacturing both experiencing their largest percentage declines of the post-WWII era. Service-providing 

industries also experienced large employment declines. 

Although the percentage declines in private services were 

not as large as those in the good-producing industries, they 

were the largest on record for private services. 

Construction was among the hardest hit industries 

during the recession.24 Deep employment losses began 

in residential construction and spread to nonresidential 

construction as commercial and industrial projects dwindled.25 Since peaking in April 2006, employment in construction has fallen by 2.2 million, or 28.8 percent, as of 

December 2010. Large job losses are not unprecedented 

in construction, which is known as a highly cyclical industry. However, even considering the volatile history of 

the construction industry, the 2007–09 downturn stands 

out. Declines from the prerecession peak in construction 

employment easily exceeded those of the earlier housing 

busts in the 1980s and 1990s, and are the steepest since 

the labor dislocations during WWII. 

Manufacturing, which had been losing jobs for 10 

years before the 2007–09 recession, also experienced sig-
The 2007–09 Recession: Overview

6 Monthly Labor Review • April 2011

Percent change in employment during recessions, 1945–2010, seasonally adjusted

Industry

Feb. 1945–

Oct. 1945

(8 months)

Nov. 1948–

Oct. 1949

(11 months)

July 1953–

May 1954

(10 months)

Aug. 1957–

Apr. 1958

(8 months)

Apr. 1960– 

Feb. 1961

(10 months)

Dec. 1969–

Nov. 1970

(11 months)

Total nonfarm ........................................................... –7.9 –5.0 –3.1 –4.0 –2.3 –1.2

Total private............................................................... –8.2 –6.0 –3.8 –4.9 –2.8 –2.0

 Goods producing .................................................. –17.8 –10.6 –7.2 –8.2 –5.3 –6.7

 Service providing .................................................. –.6 –1.4 –.4 –1.5 –.6 1.5

 Mining and logging............................................ –10.9 –38.7 –8.7 –9.6 –7.5 –2.0

 Construction ......................................................... 3.4 –2.7 .9 –5.5 –3.9 –1.7

 Manufacturing...................................................... –19.9 –9.8 –8.4 –8.6 –5.4 –7.9

 Durable goods.................................................... –30.2 –15.4 –11.2 –12.2 –7.7 –11.0

 Nondurable goods............................................ –1.2 –2.6 –4.3 –3.0 –2.2 –3.0

 Wholesale trade ................................................... 6.9 –1.8 .1 –1.9 –.8 .5

 Retail trade............................................................. 3.2 –1.1 –.7 –2.6 –2.4 .6

 Transportation and warehousing.................. — — — — — —

 Utilities.................................................................... — — — — — 2.1

 Information............................................................ –8.3 –7.9 –6.0 –6.8 –3.7 –2.5

 Financial activities............................................... 4.1 1.5 3.2 1.0 1.9 2.8

 Professional and business services............... –3.0 –2.7 –1.4 –2.6 .1 .7

 Education and health services........................ 4.0 .9 1.4 –.4 2.3 2.3

 Leisure and hospitality ...................................... 2.9 –.7 –.3 –1.8 –1.9 1.2

 Other services....................................................... 3.7 1.0 1.5 –.4 2.2 2.2

 Government.......................................................... –6.2 1.7 1.6 1.4 .6 2.8

Nov. 1973–

Mar. 1975 

(16 months)

Jan. 1980–

July 1980

(6 months)

July 1981–

Nov. 1982

(16 months)

July 1990–

Mar. 1991

(8 months)

Mar. 2001– 

Nov. 2001

(8 months)

Dec. 2007–

June 2009

(18 months)

Total nonfarm ........................................................... –1.6 –1.1 –3.1 –1.1 –1.2 –5.4

Total private............................................................... –3.1 –1.6 –3.5 –1.3 –1.8 –6.6

 Goods producing .................................................. –10.3 –5.0 –10.6 –4.1 –4.9 –16.2

 Service providing .................................................. 2.2 .4 –.4 –.3 –.4 –3.4

 Mining and logging............................................ 11.1 2.8 –12.4 –1.3 –1.5 –7.3

 Construction ......................................................... –14.3 –5.9 –8.2 –7.5 –1.1 –19.8

 Manufacturing...................................................... –10.2 –5.2 –11.0 –3.2 –6.6 –14.6

 Durable goods.................................................... –10.7 –6.5 –14.1 –4.3 –7.5 –17.5

 Nondurable goods............................................ –9.4 –3.1 –5.8 –1.4 –5.0 –9.8

 Wholesale trade ................................................... 1.4 –.3 –2.8 –1.4 –1.9 –7.6

 Retail trade............................................................. 0.5 –.7 –.4 –1.7 –1.3 –6.7

 Transportation and warehousing.................. –3.6 –3.0 –6.1 –.3 –4.2 –7.3

 Utilities.................................................................... –.2 1.7 3.4 –.6 .0 .6

 Information............................................................ –4.7 –2.2 –4.7 –.3 –4.9 –7.6

 Financial activities............................................... 1.5 1.4 1.0 –.4 .6 –5.8

 Professional and business services............... 1.8 .8 .6 –1.9 –3.8 –8.9

 Education and health services........................ 4.7 1.9 2.6 3.5 2.6 3.3

 Leisure and hospitality ...................................... 1.3 –.3 .4 –.3 –.1 –3.4

 Other services....................................................... 4.5 1.9 2.5 –.1 2.2 –2.5

 Government.......................................................... 5.1 1.3 –1.2 –.4 1.8 .8

NOTE: Dashes indicate data not available.

SOURCE: Bureau of Labor Statistics, Current Employment Statistics survey.

Table 1.
Monthly Labor Review • April 2011 7

nificant job losses during it.26 The industry’s declines in 

employment accelerated sharply during the latest recession. However, some areas of manufacturing did add jobs 

through the first 9 months of the recession. Machinery 

and aerospace products and parts manufacturing, both 

with a large share of employment dependent on exports, 

added jobs over that period. Growth in these two industries, however, did not withstand the deepening of the 

economic downturn. Nearly all manufacturing industries 

lost jobs over the course of the recession. Manufacturing 

employment fell 2.0 million, or 14.6 percent, from December 2007 through June 2009. Some of the most severe 

job losses were in motor vehicles and parts manufacturing, 

in which employment fell 35 percent during the recession. 

The most recent recession was unique with regard to 

the breadth and depth of the employment decline in private service-providing industries. (See chart 2.) Collectively, private service-providing industries have accounted 

for the majority of job growth over the past 20 years and 

had previously avoided large job losses during recessions. 

As the downturn began in late 2007, employment losses 

spread beyond the housing-related and goods-producing 

industries to affect the private service-providing industries 

on the whole. After peaking in January 2008, employment 

in private services declined for the next 21 months. Virtually all private service-providing industries were affected, 

particularly those related to housing and autos. Financial 

activities, retail and wholesale trade, transportation and 

warehousing, information, temporary help, and leisure 

and hospitality all experienced their largest sustained job 

losses on record.27

Few industries attracted as much attention during the 

recent downturn as financial activities. Before the downturn, the financial industry expanded rapidly for several 

years as credit and other financial markets grew.28 As the 

housing market weakened in 2006, however, job growth in 

financial activities faltered. Employment in that industry 

peaked in December—1 year before the official start of the 

recession. The industry shed 126,000 jobs in 2007. Initially, 

employment losses were relatively modest and contained 

in those industries within finance that are most closely 

connected to housing. However, by September 2008, losses 

had spread throughout the industry; virtually every component of finance was affected by the financial crisis. Job 

losses in finance continued after the recession ended. Before 2007, the only recession (since 1939) to see job losses 

Number of months from start of recession

1981–82 recession

Chart 2. Employment in private service-providing industries, seasonally adjusted 

Index

[start of recession = 0]

Index

[start of recession = 0]

8

6

4

2

0

–2

–4.

–6

–8

–6 –4 –2 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36

NOTE: Business cycle peaks are determined by the National Bureau of Economic Research. 

SOURCE: Bureau of Labor Statistics, Current Employment Statistics survey.

8

6

4

2

0

–2

–4

–6

–8

1973–75 recession

2007–09 recession

1990–91 recession

2001 recession
The 2007–09 Recession: Overview

8 Monthly Labor Review • April 2011

in financial activities was that of 1990–91, when the industry was struggling with the savings and loan crisis.

Outside of finance, retail trade and leisure and hospitality—consumer-oriented industries—experienced record employment declines.29 During the recession, these 

industries lost 1.0 million and 454,000 jobs, respectively. 

As incomes and wealth declined during this period, consumers increased their savings rates and reduced spending 

on discretionary purchases such as consumer electronics, 

travel, and restaurant meals.30

Employment in professional and business services, 

a broad industry which includes a variety of services—

from administrative and waste services to accounting and 

bookkeeping—declined by over 1.6 million during the 

most recent recession. In absolute terms, this decline was 

second only to that in manufacturing, and represented 

a sharp reversal from the robust growth in employment 

during the preceding 5 years. Roughly half of the losses 

occurred within the temporary help services industry, 

which is widely viewed as an indicator of coming trends 

in overall nonfarm employment. Temporary help employment peaked in August 2006, 17 months before the peak 

in total nonfarm employment, and started adding jobs 6 

months before overall employment reached its trough.

Education and health services was by far the largest 

private industry, as measured by employment, to add 

jobs during the recession. Employment in education and 

health services has grown regardless of the business cycle 

phase for more than 30 years. This industry provides critical services to an ever-growing population. Despite the 

gains, the industry was not completely immune to the 

recession; its rate of employment growth slowed from its 

rate of growth in the 3 years preceding the recession. 

At its lowest point in October 2009, employment in 

private service-providing industries had fallen by 4.6 million from its previous high in January 2008, the steepest 

decline in the history of the series. Employment losses 

in private service-providing industries were also unprecedented with regard to their share of total nonfarm employment losses. In previous downturns, private services 

typically have accounted for around one-quarter of total 

nonfarm employment losses. In the recent downturn, 

however, they accounted for nearly half of the total decline, well above the previous record. 

Overall, government employment grew during the 

2007–09 recession. Federal Government employment (excluding temporary Census workers) grew by 48,000 from 

December 2007 through June 2009. State and local governments added jobs during the first several months of the 

recession, but after employment reached a high point in 

August 2008, they shed 68,000 jobs through the end of the 

recession—a decline of about 0.3 percent. (See chart 3.) 

Employment in State and local government tends not to 

fall during recessions, and job growth in these areas actually accelerated during the 1990–91 and 2001 recessions.31

State and local governments have less flexibility than 

the Federal Government to run deficits; nearly all State 

governments have some form of a balanced-budget requirement.32 State tax revenues—received primarily from 

income, sales, and gross receipts taxes—are sensitive to 

the business cycle, and they began to fall on an annual 

basis after September 2008.33 Falling revenues put pressure on States to cut employment, which they began to 

do after August 2008. In order to shore up State budgets, 

nearly 60 billion dollars of fiscal relief was given by the 

Federal Government to the States in 2009 as part of the 

American Recovery and Reinvestment Act. This stimulus 

package was also intended to help local governments stave 

off job cuts.34

Local governments, unlike State governments, did not 

see a drop in tax revenue. Local government tax revenues 

come mostly from property taxes, which continued to grow 

throughout the recession despite declining home values.35

But, according to the National League of Cities, revenue 

growth was outpaced by spending growth in 2008 and 

2009, and local governments began reducing employment 

after September 2008 in order to cover budget shortfalls.36

The recession led not only to employment losses, but 

also to cuts in workers’ hours.37 In June 2009, average 

weekly hours of all employees had fallen by 1 hour to 33.7 

hours from the peak in June 2007. Aggregate hours, the 

product of employment and average weekly hours, fell 

by 9.8 percent between June 2007 and October 2009. As 

2010 came to a close, aggregate hours were still 7.6 percentage points below their prerecession peak.

Length

The United States has experienced 11 periods of sustained 

employment declines since the inception of the CES survey 

in 1939. Large declines in employment tend to be associated with recessions. (See charts 4 and 5.) However, peaks 

and troughs in employment generally do not directly align 

with the official starting points and endpoints of recessions. Between January 2008 and February 2010, employment fell by 8.8 million—the largest absolute decline in 

the series’ history. The previous record was 4.3 million net 

jobs lost from November 1944 to September 1945. 

It is hard to generalize given the differences in depth 

and duration among employment downturns, but the 
Monthly Labor Review • April 2011 9

average employment decline before the most recent recession resulted in a drop in employment of 3.6 percent 

and lasted 15 months. (See table 2). The most recent employment decline, from 2008 to 2010, was a 6.3-percent 

decrease and lasted 25 months. In percentage terms, the 

recent decline is exceeded in depth only by that which 

occurred as WWII was ending. Measured by duration, 

only the 30-month employment downturn from February 2001 to August 2003 was longer than the most recent 

downturn. 

In addition to its depth and length, the recent downturn is unique in that it is the first on record to have erased 

all of the jobs gained in the previous economic expansion. 

This situation resulted not only from the sharp decline in 

employment, but also from relatively tepid job growth in 

the preceding expansion. From August 2003 to January 

2008, employment grew by 6.3 percent, its weakest expansion since WWII. From the end of WWII to the expansion 

that ended in February 2001, the average employment 

expansion had been a gain of 17.8 percent. In February 

2010, employment was 576,000 below its previous cycle 

low, August 2003. Before the most recent recession, at the 

end of boom-and-bust cycles the overall employment level had always remained well above where it started, even 

after the worst declines.

THE U.S. LABOR MARKET IS CURRENTLY RECOVERING from the deepest employment downturn since the 

end of World War II. Not only were there heavy losses in 

employment; the downturn was notable for its length and 

for the breadth of industries affected. The downturn started 

in the housing-related and good-producing industries in 

2006. Over the course of 2008, the pace of declines accelerated as employment losses spread to private service-providing industries. Economic output resumed in late 2009, 

and employment reached a trough in February 2010. In 

addition to the positive signs in overall employment, there 

are two other measures that suggest firming in the labor 

market. Average weekly hours and employment in temporary help services, both traditionally viewed as precursors 

of nonfarm employment trends, both have increased since 

their lows in June 2009 and August 2009, respectively. Despite the improvements in 2010, employment remains 7.7 

million jobs below its prerecession peak as of December 

2010, while the economy continues to struggle with the 

largest employment decline since WWII.

Chart 3. Federal, State, and local government employment, excluding temporary Census employment, 

 June 2007–December 2010, seasonally adjusted

4

3

2

1

0

–1

–2

–6 –4 –2 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36

NOTE: Business cycle peaks are determined by the National Bureau of Economic Research. 

SOURCE: Bureau of Labor Statistics, Current Employment Statistics survey.

4

3

2

1

0

–1

–2

Federal Government

State government

Local government

Number of months from start of recession

Index

[start of recession = 0]

Index

[start of recession = 0]
The 2007–09 Recession: Overview

10 Monthly Labor Review • April 2011

Chart 4. Total nonfarm employment, seasonally adjusted, selected recessions, 1945–58, and the 2007–09 recession

–6 –4 –2 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36

NOTE: Business cycle peak as determined by the National Bureau of Economic Research. 

SOURCE: Bureau of Labor Statistics, Current Employment Statistics survey.

8

6

4

2

0

–2

–4

–6

–8

–10

1945 recession 2007–09 recession

1953–54 recession

1957–58 recession

1948–49 recession

8

6

4

2

0

–2

–4

–6

–8

–10

Number of months from start of recession

Index

[start of recession = 0]

Index

[start of recession = 0]

Chart 5. Total nonfarm employment, seasonally adjusted, selected recessions, 1973–2009 

–6 –4 –2 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36

NOTE: Business cycle peak as determined by the National Bureau of Economic Research. 

SOURCE: Bureau of Labor Statistics, Current Employment Statistics survey.

1981–82 recession

1973–75 recession

2007–09 recession

1990–91 recession

2001 recession

Index

[start of recession = 0]

Index

[start of recession = 0]

Number of months from start of recession

8

6

4

2

0

–2

–4

–6

–8

–10

8

6

4

2

0

–2

–4

–6

–8

–10
Monthly Labor Review • April 2011 11

Notes

1 Recessions are identified by the National Bureau of Economic 

Research (NBER). According to the NBER, the most recent recession 

began in December 2007 and ended in June 2009. The previous two 

recessions were from March 2001 to November 2001 and from July 

1990 to March 1991. For a complete list of business cycle dates, consult 

the NBER webpage at http://www.nber.org/cycles/cyclesmain.html

(visited Nov. 2, 2010).

2 The data on employment used in this article are from the CES 

survey, which is a monthly survey of approximately 140,000 nonfarm businesses and government agencies representing approximately 

440,000 individual worksites. For more information on the CES program’s methods, see “Technical Notes to Establishment Survey Data 

Published in Employment and Earnings” at http://www.bls.gov/web/

cestn2.htm (visited Mar. 31, 2011). CES data are available at http://

www.bls.gov/ces (visited Mar. 31, 2011). The CES data used in this 

article are seasonally adjusted unless otherwise noted.

3 The current CES monthly total nonfarm payroll employment series goes back to January 1939.

4 The term “Great Recession” has been used in numerous publications and is now considered an accepted term by the Associated Press. 

5 The data on unemployment rates used in the article are from the 

Current Population Survey (CPS). CPS data are available at http://

www.bls.gov/cps (visited Mar. 31, 2011). The CPS data used in the 

article are seasonally adjusted unless otherwise noted.

6 Housing is not a defined industry. Activity related to the housing 

market cuts across a variety of industries and includes activities such as 

residential construction, financial activities, manufacturing, and retail 

sales.

7 For a complete overview of health care employment trends, see 

Nonfarm expansions and contractions in employment, seasonally adjusted, 1945–2010

Expansions Contractions

Employment 

contraction 

as percent of 

expansion Trough to peak

Change in 

employment (in 

thousands)

Percent 

change

Length 

(in 

months)

Annualized 

growth 

rate

Peak to trough

Change in 

employment (in 

thousands)

Percent 

change

Length 

(in 

months)

Annualized 

growth 

rate

Nov 1943–Sep 1945 –4,319 –10.1 22 –9.2 . . .

Sep 1945–Sep 1948 6,794 17.6 36 5.6 Sep 1948–Oct 1949 –2,344 –5.2 13 –4.8 34.5

Oct 1949–Jul 1953 7,586 17.7 45 4.4 Jul 1953–Aug 1954 –1,711 –3.4 13 –3.1 22.6

Aug 1954–Apr 1957 4,413 9.0 32 3.3 Apr 1957–Jun 1958 –2,326 –4.4 14 –3.8 52.7

Jun 1958–Apr 1960 3,900 7.7 22 4.1 Apr 1960–Feb 1961 –1,256 –2.3 10 –2.7 32.2

Feb 1961–Mar 1970 17,897 33.4 109 3.2 Mar 1970–Nov 1970 –1,044 –1.5 8 –2.2 5.8

Nov 1970–Jul 1974 8,225 11.7 44 3.1 Jul 1974–Apr 1975 –2,171 –2.8 9 –3.7 26.4

Apr 1975–Jul 1981 15,131 19.8 75 2.9 Jul 1981–Dec 1982 –2,838 –3.1 17 –2.2 18.8

Dec 1982–Jun 1990 21,061 23.7 90 2.9 Jun 1990–May 1991 –1,621 –1.5 11 –1.6 7.7

May 1991–Feb 2001 24,334 22.5 117 2.1 Feb 2001–Aug 2003 –2,708 –2.0 30 –.8 11.1

Aug 2003–Jan 2008 8,174 6.3 53 1.4 Jan 2008–Feb 2010 –8,750 –6.3 25 –3.1 107.0

SOURCE: Bureau of Labor Statistics, Current Employment Statistics survey.

Table 2.

Catherine A. Wood, “Employment in health care: a crutch for the ailing economy during the 2007–09 economy,” Monthly Labor Review, 

this issue, pp. 13–18.

8 Richard K. Green, “Follow the Leader: How Changes in Residential and Non-residential Investment Predict Changes in GDP,” 

Real Estate Economics, June 1997, pp. 253–70. This article looks at 

the relationship between GDP and residential investment and nonresidential investment. Green finds that residential investment tends to 

begin rising before the trough of the business cycle begin falling before 

the peak. Nonresidential investment lags the overall business cycle and 

appears to be more a symptom than a cause of economic downturns. 

9 Data on new housing starts, permits, and home sales are produced 

by the U.S. Census Bureau. For more information on starts and 

permits, see http://www.census.gov/const/www/newresconstindex.

html (visited Dec. 22, 2010). For more information on new home 

sales levels and prices, see http://www.census.gov/const/www/

newressalesindex.html (visited Dec. 22, 2010).

10 Eric Belsky and Joel Prakken, Housing Wealth Effects: Housing’s 

Impact on Wealth Accumulation, Wealth Distribution and Consumer 

Spending (Cambridge, Mass., Harvard University, Joint Center for 

Housing Studies, 2004), http://www.jchs.harvard.edu/publications/

finance/w04-13.pdf (visited Mar. 31, 2011). BusinessDictionary.com 

defines the wealth effect as “changes in aggregate demand caused by 

change in the value of assets such as stocks, bonds, gold, property” and 

explains, “Increase in the market value of these assets induces a feeling 

of being ‘richer’ in their owners (even if no additional cash is realized) 

and often tends to encourage spending and to dampen savings.” See 

http://www.businessdictionary.com/definition/wealth-effect.html 

(visited Dec. 22, 2010). 

11 Data on U.S. household real estate assets are from the Federal 
The 2007–09 Recession: Overview

12 Monthly Labor Review • April 2011

Reserve’s Flow of Funds release. See http://www.federalreserve.gov/

RELEASES/z1/Current/z1r-5.pdf (visited Dec. 19, 2010). The net 

worth of households and nonprofit organizations rose by 39.9 percent 

between 2003 and 2006.

12 Alan Greenspan and James Kennedy, Sources and Uses of Equity 

Extracted from Homes (Washington, DC, Board of Governors of the 

Federal Reserve System, March 2007), http://www.federalreserve.

gov/pubs/FEDS/2007/200720/200720pap.pdf (visited Dec. 15, 

2010); see table 2 on pp. 16–25.

13 Belsky and Prakken, Housing Wealth Effects.

14 http://www.census.gov/const/www/newresconstindex.html.

15 Data on delinquency are from the Mortgage Bankers Association’s National Delinquency Survey. See http://www.mbaa.

org/ResearchandForecasts/ProductsandSurveys/NationalDelin 

quencySurvey.htm (visited Mar. 31, 2011).

16 Danielle DiMartino and John V. Duca, “The Rise and Fall of 

Subprime Mortgages,” Economic Letter—Insights from the Federal 

Reserve Bank of Dallas, November 2007, http://www.dallasfed.org/

research/eclett/2007/el0711.html (visited Jan. 7, 2011).

17 James D. Hamilton, Causes and Consequences of the Oil Shock of 

2007–08 (Washington, DC, Brookings Institution, February 2009, 

revised March 2009), http://www.brookings.edu/economics/

bpea/~/media/Files/Programs/ES/BPEA/2009_spring_bpea_

papers/2009_spring_bpea_hamilton.pdf (visited Mar. 31, 2011). 

Crude oil prices are from the Bureau of Labor Statistics Producer Price 

Index program, series WPU056, and were extracted on Dec. 23, 2010.

18 Table 2.3.1, “Percent Change From Preceding Period in Real Personal Consumption Expenditures by Major Type of Product” (Bureau 

of Economic Analysis, National Income and Product Accounts), www.

bea.gov/national/nipaweb/TableView.asp?SelectedTable=61&Fre

q=Qtr&FirstYear=2008&LastYear=2010 (visited Dec. 23, 2010). 

19 Hamilton, Causes and Consequences of the Oil Shock of 2007–08.

20 For an overview of mining employment trends, see Brian Davidson, “Mining employment trends of 2007–09: a question of prices,” 

Monthly Labor Review, this issue, pp. 19–23.

21 Both the 1990–91 and 2001 recessions lasted 8 months, but employment continued to decline after the end of both recessions.

22 Data on lending standards are available from the Federal Reserve 

Board’s Senior Loan Officer Opinion Survey on Bank Lending Practices. See http://www.federalreserve.gov/boarddocs/snloansurvey/ 

(visited Mar. 31, 2011). 

23 The CES 1-month diffusion index measures the dispersion of employment change across industries over the month. The overall index is 

calculated from 267 seasonally adjusted employment series (primarily 

4-digit NAICS industries) covering all nonfarm payroll employment 

in the private sector. To derive the index, each component industry is 

assigned a value of 0 percent, 50 percent, or 100 percent, depending on 

whether its employment showed a decrease, no change, or an increase, 

respectively, over the month. The average value (mean) is then calculated, and this percent is the diffusion index number.

24 For an overview of trends in construction employment, see Adam 

Hadi, “Construction employment peaks before the recession and falls 

sharply throughout it,” Monthly Labor Review, this issue, pp. 24–27.

25 Nonresidential construction spending is based upon the Bureau 

of Economic Analysis’s nonresidential structures investment component of GDP. See Table 1.1.6, “Real Gross Domestic Product, Chained 

Dollars” (Bureau of Economic Analysis), line 8, http://www.bea.gov/

national/nipaweb/TableView.asp?SelectedTable=6&FirstYear=200

9&LastYear=2010&Freq=Qtr (visited Jan. 8, 2011). 

26 For a complete overview of manufacturing employment trends, 

see Megan M. Barker, “Manufacturing employment hard hit during 

the 2007–09 recession,” Monthly Labor Review, this issue, pp. 28–33.

27 For an overview of temporary help employment trends, see Frank 

Conlon, “Professional and business services: employment trends in the 

2007–09 recession,” Monthly Labor Review, this issue, pp. 34–39.

28 For an overview of trends in financial activities employment, see 

George Prassas, “Employment in financial activities: double billed by 

housing and financial crises,” Monthly Labor Review, this issue, pp. 

40–44.

29 For an overview of retail trends, see Michael D. McCall, “Deep 

drop in retail trade employment during the 2007–09 recession,” 

Monthly Labor Review, this issue, pp. 45–48. For an overview of trends 

in leisure and hospitality employment, see Eliot Davila, “Employment 

in leisure and hospitality departs from historical trends during 2007–

09 recession,” Monthly Labor Review, this issue, pp. 49–52.

30 “Off their trolleys,” The Economist, May 7, 2009, http://www.

economist.com/finance/displaystory.cfm?story_id=13611284 (visited Dec. 22, 2010).

31 Julie Hatch, “Employment in the public sector: two recessions’ 

impact on jobs,” Monthly Labor Review, October 2004, pp. 38–47, 

http://www.bls.gov/opub/mlr/2004/10/art3full.pdf (visited Apr. 4, 

2011).

32 See “NCSL Fiscal Brief: State Balanced Budget Provisions” 

(Washington, DC, National Conference of State Legislatures, October 

2010), http://www.ncsl.org/documents/fiscal/StateBalancedBudget 

Provisions2010.pdf (visited Jan. 12, 2010).

33 “Quarterly Summary of State and Local Tax Revenue” (U.S. 

Census Bureau), http://www.census.gov/govs/qtax/ (visited Jan. 12, 

2011).

34 The Economic Impact of the American Recovery and Reinvestment Act 

of 2009, Second Quarterly Report (Washington, DC, Council of Economic 

Advisors, Jan. 13, 2010), p. 10, http://www.recovery.gov/About/

Documents/100113-economic-impact-arra-second-quarterlyreport.pdf (visited Dec. 23, 2010); Christopher W. Hoene and Michael 

A. Pagano, “City Fiscal Conditions in 2009” and “City Fiscal Conditions 

in 2010” (Washington, DC, National League of Cities) http://www.

nlc.org/ASSETS/E0A769A03B464963A81410F40A0529BF/

CityFiscalConditions_09%20(2).pdf and http://www.nlc.org/

ASSETS/AE26793318A645C795C9CD11DAB3B39B/RB_

CityFiscalConditions2010.pdf (visited Jan. 12, 2011). Municipalities 

rely on State funding for about 12 percent of their budgets.

35 “Quarterly Summary of State and Local Tax Revenue.” Local tax 

revenues were calculated as the difference between the national total of 

State and local government tax revenue and the national total of State 

tax revenue.

36 “City Fiscal Conditions in 2009” and “City Fiscal Conditions 

in 2010.” The years referred to are the 2008 and 2009 fiscal years, as 

defined by individual municipal corporations.

37 For an overview of trends in average weekly hours, see Steven 

Kroll, “The decline in work hours during the 2007–09 recession,” 

Monthly Labor Review, this issue, pp. 53–59.