Monthly Labor Review • April 2011 13

The 2007–09 Recession: Health Care

Catherine A. Wood The health care industry added 428,000 jobs throughout the 

18-month recession from December 

2007 until June 2009 and has continued to 

grow at a steady rate since the end of the 

recession.1 Historically, health care employment has been immune from fluctuations in 

the business cycle, as shown by the industry’s continued growth throughout previous 

recessions. Indeed, the industry has been 

among the leading contributors to overall 

job growth during recessions. In an economy 

hit with more than 7.5 million job losses, a 

national unemployment rate that rose to 10 

percent in October 2009, and large declines 

in gross domestic product (GDP), all since 

the start of the most recent recession, the 

health care industry stood out as one of a 

few areas that continued adding jobs, thereby serving as a crutch for the ailing economy.

Industry trends during downturns

As in past recessions, the health care industry served as a beacon of job opportunities 

while total nonfarm employment plummeted in the 2007–09 recession. (See chart 1.) 

Fiscal stimulus packages funded hospitals 

through additional Medicaid subsidies and 

increased health-related spending during 

the recession, a common accompaniment of 

economic downturns. These federally funded programs effectively made health coverage more affordable for, and available to, 

the unemployed. In the 2007–09 recession, 

one such program allowed the unemployed 

to finance and maintain their employersponsored private health coverage: the temporarily extended Consolidated Omnibus 

Budget Reconciliation Act (COBRA) guaranteed those out of work temporary coverage through subsidies that enabled them to 

pay their premiums. Fiscal stimuli also enabled hospitals to increase hiring, improve 

information technologies, and increase 

emergency care services to the unemployed, 

with Medicaid funding typically covering 

these services, thus offering a more economical substitution for primary care providers.2

One important opposing factor was the 

heightened cost of care, which weakened 

the demand for health services and resulted 

in a slower rate of job growth than in previous downturns. (See chart 2.) In the longest 

recession since World War II, government 

subsidies were insufficient to meet health 

care costs throughout the 18-month downturn. Consequently, coverage became more 

limited and unaffordable as (1) hospitals 

overspent Medicaid expenditures that were 

driven by the addition of 3.5 million new enrollees, (2) programs expired, and (3) health 

Employment in health care:

a crutch for the ailing economy

during the 2007–09 recession

During the last recession, employment in the health care industry

grew while total nonfarm employment was down by more

than 7.5 million; although growth in health care was not as robust as

in the previous two recessions, the industry still gained 428,000 jobs

Catherine A. Wood is an 

economist in the Office 

of Employment and 

Unemployment Statistics, 

Bureau of Labor Statistics. 

Email: wood.catherine@

bls.gov.
The 2007–09 Recession: Health Care

14 Monthly Labor Review • April 2011

Index 

(first month of 

recession = 100)

Index

 (first month of

recession = 100)

 NOTE: Beginning and ending months of recessions are determined by the National Bureau of Economic Research (NBER).

114

112

110

108

106

104

102

100

98

96

114

112

110

108

106

104

102

100

98

96

 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 

1990 recession

2001 recession

2007–2009 recession

Number of months since beginning of recession

Chart 2. Health care index of employment, seasonally adjusted

NOTE: Shaded areas represent recessions as determined by the National Bureau of Economic Research (NBER).

Chart 1. Total nonfarm and health care indexes of employment, seasonally adjusted, 1990–2010

Index

(January 2000 = 100)

Index

 (January 2000 = 100)

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

130

120

110

100

90

80

70

130

120

110

100

90

80

70

Health care employment Total nonfarm employment

SOURCE: U.S. Bureau of Labor Statistics.

SOURCE: U.S. Bureau of Labor Statistics.
Monthly Labor Review • April 2011 15

care providers were forced to make budget cuts and hire 

at a slower rate. As the number of medically uninsured 

increased by 3.8 million (from 42.7 million in 2008 to 46.5 

million in 2009) and Medicaid enrollments escalated, limited resources shrank and the cost to the patient increased 

significantly.3

The low growth rate of national health spending 

throughout the 2007–09 recession explains why job 

growth progressed at a slower pace than during previous recessions. In 2009, national health spending grew 

by 4.0 percent, the lowest annual rate of increase in the 

50-year history of the National Health Expenditure Accounts. This rate was preceded in 2008 by 4.7-percent 

growth, the second-lowest historical rate. Both rates of 

growth of health care spending in the most recent recession are significantly lower than the 8.5-percent and 

11.0-percent rates posted in the recessions of 1990 and 

2001, respectively.4 As one source put it, “The recession 

contributed to slower growth in private health insurance 

spending and out-of-pocket spending by consumers, as 

well as a reduction in capital investments by health care 

providers.”5 The increased burden the recession placed 

on households, businesses, and governments limited the 

financial resources that were available to pay for health 

care. As they lost their jobs and, consequently, their employer-sponsored private health care coverage, individuals could not afford health care and were forced to discontinue maintenance care and elective procedures, thus 

weakening the demand for health services.6

Despite the weakened demand for care, job growth was 

widespread and robust across health care throughout the 

2007–09 recession, as all of the industry’s components—

ambulatory health care services, hospitals, and nursing 

and residential care facilities—boosted employment.7

(See table 1 and chart 3.) Employment in these industries grew, at least in part, as a result of the increasing U.S. 

population and the continued, albeit slower, growth in demand for health care. From 2000 to 2009, the population 

increased by 26 million, or 9 percent, and from 1990 to 

2009 by 58 million, or 23 percent.8 The growing and aging population, with its consequent increased demand for 

health care services, resulted in a net gain in job growth 

throughout the industry during the past three recessions.

Ambulatory health care services

Employment in ambulatory health care services,9 such as 

doctors’ offices and home health care services, had the largest positive contribution to job growth in the health care 

industry during the last three recessions. Ambulatory care 

added 231,000 jobs, or an average of 13,000 per month, in 

the 2007 recession, compared with 13,000 per month during the 2001 recession and 15,000 per month in the 1990 

recession. Within ambulatory services, home health care 

services had the greatest impact on job growth in the most 

recent recession, boosting employment by 95,000 as more 

affordable alternative care options increased. An infant industry in the 1990s, home health care grew dramatically 

as an economical option to traditional nursing homes. As 

medical technologies such as electromyography allowed 

the disabled to become more independent and use handsfree devices controlled by small muscle movements (for 

example, the blink of an eye), as pacemakers enabled cardiologists to control irregular heart rates, and as companion services spurred the growth in employment of home 

health care aides,10 preferences for in-home care increased 

among the elderly and disabled population.

Hospitals

Although health care employment tends to expand 

throughout changing business cycles, hospital employment has moved countercyclically to both real GDP and 

total nonfarm employment throughout the last three 

recessions.11 (See chart 4.) Consequently, when unemployment rises, so does the jobs growth rate in hospitals. 

According to one economist, “While the trend of employment in all hospitals combined is consistently upward, the 

rate of growth may be described as countercyclical: when 

general business conditions are weak, hospital employment exhibits greater growth.”12 Hospital employment 

saw its most significant gains at the onset of the most 

recent three recessions, when GDP declines were at their 

highest.13 In the 2007–09 recession, employment in hospitals added an average of 10,000 jobs per month between 

December 2007 and July 2008, whereas health care employment gained an average of 3,000 per month from August 2008 through the end of the recession in June 2009.

Real government hospital expenditures fluctuated opposite real GDP and help explain the countercyclical movement of hospital employment. As unemployment levels 

rose, discretionary funding to hospitals and social services 

through Medicare and Medicaid increased.14 Although 

hospital work is generally less attractive than other health 

care jobs, more workers were motivated to resort to hospital jobs as other health care employment options declined 

and jobs became more limited and unstable. Growth in 

hospital employment slowed during the last 10 months of 

the recent recession as Federal subsidies ran out and financial pressures resulted in budget cuts and reductions in staff.
The 2007–09 Recession: Health Care

16 Monthly Labor Review • April 2011

Nursing and residential care facilities

Despite having grown, employment in nursing and residential care facilities did not account for as large a share of 

health care employment gains in the 2007–09 recession as 

it did in both the 1990 and 2001 recessions. This falloff in 

share is due primarily to the creation of the home health 

care industry and alternative care options that offset rising 

demand from the aging population. Employment in nursing and residential care facilities grew by 95,000 during 

the most recent recession, accounting for 22 percent of the 

total jobs added in the health care industry. In the 1990 

and 2001 recessions, nursing and residential care facilities 

had accounted for 32 percent and 27 percent, respectively, 

of the total jobs added in health care. This shift indicates 

the preference for alternative options over nursing and 

residential care facilities.

Nursing and residential care facilities expanded conTable 1. Employment in selected components of the health care industry and in total nonfarm establishments,

 in thousands, seasonally adjusted, previous three recessions

Industry

December 2007–

June 2009

March 2001–

November 2001

July 1990–

March 1991

Net 

change 

in jobs

Average 

monthly 

change

Net 

change

 in jobs

Average 

monthly 

change

Net 

change 

in jobs

Average 

monthly 

change

Total nonfarm............................................................................................................ –7,490 –416 –1,599 –200 –1,240 –155

Health care....................................................................................................... 428 24 250 31 270 34

Ambulatory health care services................................................................ 231 13 105 13 116 15

Offices of physicians.................................................................................... 46 3 45 6 41 5

Outpatient care centers............................................................................. 33 2 10 1 5 1

Home health care services........................................................................ 95 5 21 3 38 5

Hospitals.............................................................................................................. 102 6 78 10 67 8

Nursing and residential care facilities....................................................... 95 5 67 8 87 11

Nursing care facilities................................................................................... 34 2 24 3 56 7

NOTE: Beginning and ending months of recessions are determined by the National Bureau of Economic Research (NBER).

 Chart 3. Employment index for selected components of health care industry, seasonally adjusted, 1990–2010

140

130

120

110

100

90

80

70

60

140

130

120

110

100

90

80

70

60

Index

(January 2000 = 100)

Index

(January 2000 = 100)

 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

NOTE: Shaded areas represent recessions as determined by the National Bureau of Economic Research (NBER).

Hospitals

Nursing and residential 

care facilities

Ambulatory health care services

SOURCE: U.S. Bureau of Labor Statistics.

SOURCE: U.S. Bureau of Labor Statistics.
Monthly Labor Review • April 2011 17

Chart 4. Hospital employment, quarterly averages, seasonally adjusted, and real gross domestic product, chain-weighted 2005 dollars, 1990–2010

Dollars 

(billions)

Hospital employment 

(thousands)

14,000

13,000

12,000

11,000

10,000

9,000

8,000

7,000

4,800

4,600

4,400

4,200

4,000

3,800

3,600

3,400

3,200

3,000

 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

Hospital employment 

Gross domestic product

NOTE: Shaded areas represent recessions as determined by the National Bureau of Economic Research (NBER).

comitantly with the Nation’s population growth and increased life expectancy. As of 2000, “35.0 million people 

65 years of age and over were counted in the United 

States,”15 a figure that represented a 12.0-percent increase 

since 1990. Although the 65-years-and-older age bracket 

was a smaller proportion of the total population in 2000 

than in 1990, this tendency is expected to reverse as baby 

boomers begin to reach age 65, starting in 2011. In addition, total life expectancy at birth increased from 75.4 

years in 1990, to 76.8 years in 2000, and to an estimated 

78.3 years in 2010. Life expectancy is projected to rise to 

approximately 79.5 years in 2020.16

EMPLOYMENT IN THE HEALTH CARE INDUSTRY continued to grow steadily throughout the last three recessions as total nonfarm employment lost millions of jobs. 

During the longest recession since World War II, health 

care gained 428,000 jobs while the economy as a whole 

lost more than 7.5 million jobs. Although health care employment exhibited consistent monthly gains throughout 

the last three recessions, it grew less rapidly in the 2007–

09 recession than during the 1990 and 2001 downturns. 

The slowdown was due to a number of factors, including 

the length and breadth of the most recent recession; cuts 

in government funding that were not so pronounced during other economic downturns; the long-term impact of 

the loss of employer-sponsored private health coverage, 

thus decreasing the demand and affordability of health 

care; and the weakest rate of growth in national health 

spending in more than five decades. Factors such as a 

growing population, increasing life expectancy, and the 

aging of the population increased demand for health care, 

thus leading to a consistent expansion in the industry’s 

employment levels. It is safe to say that throughout the 

last three recessions the health care industry has served 

as a crutch for an ailing economy, and although its effect 

was not as pronounced in the most recent recession, that it 

boosted employment at all during such a severe and prolonged economic downturn is remarkable. 

NOTES

 1 The data on employment used in this article are from the Current 

Employment Statistics (CES) survey, a monthly survey of approximately 140,000 nonfarm business and government agencies representing 

approximately 440,000 individual worksites. For more information on 

the survey’s concepts and methodology, see “Technical Notes to Establishment Survey Data Published in Employment and Earnings” (Bureau 

of Labor Statistics, Feb. 4, 2011), http://www.bls.gov/web/cestn2.htm 

(visited Oct. 7, 2010). To access CES data, see “Current Employment 

SOURCE: Hospital employment, U.S. Bureau of Labor Statistics; gross domestic product, U.S. Bureau of Economic Analysis.
The 2007–09 Recession: Health Care

18 Monthly Labor Review • April 2011

Statistics - CES (National)” (Bureau of Labor Statistics, Mar. 4, 2011), 

http://www.bls.gov/ces (visited Apr. 21, 2011). The CES data used in 

this article are seasonally adjusted unless otherwise noted.

Recessions are identified by the National Bureau of Economic Research (NBER), according to which the most recent recession began in 

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

were from July 1990 to March 1991 and from March 2001 to November 2001, respectively. For a complete list of business cycle dates, see 

“U.S. Business Cycle Expansions and Contractions” (Cambridge, MA,

National Bureau of Economic Research, Mar. 31, 2011), http://www.

nber.org/cycles/cyclesmain.html (visited Apr. 21, 2011).

2 Anne Martin, David Lassman, Lekha Whittle, Aaron Catlin, and 

the National Health Expenditure Accounts Team, “Recession Contributes to Slowest Annual Rate of Increase in Health Spending in 

Five Decades,” Health Affairs, January 2011, pp. 11–22.

3

 Ibid. 

4

 See “Table 2. National Health Expenditures Aggregate Amounts 

and Average Annual Percent Change, by type of Expenditure: Selected Calendar Years 1960–2009” (Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group, 

January 2011), http://www.cms.gov/NationalHealthExpendData/

downloads/tables.pdf (visited Jan. 13, 2011).

5

 Martin, Lassman, Whittle, Catlin, and the National Health Expenditure Accounts Team, “Recession Contributes,” p. 11.

6

 Annamaria Lusardi, Daniel Schneider, and Peter Tufano, “The Economic Crisis and Medical Care Coverage,” Working Paper No. 15483 

(Cambridge, MA, National Bureau of Economic Research, March 

2010). 

7

 According to the North American Industry Classification System 

(NAICS), the code for the health care and social assistance sector is 62. 

The sector comprises the three health-related subsectors of ambulatory health care services (code 621), hospitals (622), and nursing and 

residential care facilities (623) (hereafter, collectively, the health care 

industry), and the social assistance subsector (624). (For a full account 

and listing of industry codes, see “North American Industry Classification System” (U.S. Census Bureau, Mar. 16, 2011), http://www.census.

gov/epcd/www/naics.html (visited Apr. 21, 2011).)

8

 Population changes and percent changes are calculated from population estimates from the U.S. Census Bureau. (See “Population 

Finder” (U.S. Census Bureau, no date), http://factfinder.census.gov/

servlet/SAFFPopulation?_submenuId=population_0&_sse=on

(visited Feb. 11, 2011).)

9

 According to NAICS, “Industries in the Ambulatory Health Care 

Services subsector provide health care services directly or indirectly 

to ambulatory patients and do not usually provide inpatient services. 

Health practitioners in this subsector provide outpatient services, with 

the facilities and equipment not usually being the most significant 

part of the production process.” (See “2007 NAICS definitions: 621 

Ambulatory Health Care Services” (U.S. Census Bureau, no date), 

http://www.census.gov/naics/2007/def/NDEF621.HTM#N621

(visited Jan. 11, 2011).) Components of the ambulatory health care 

services subsector include offices of physicians (NAICS 6211), offices 

of dentists (6212), offices of other health practitioners (6213), outpatient care centers (6214), medical and diagnostic laboratories (6215), 

home health care services (6216), and other ambulatory health care 

services (6219). (For industry definitions and codes, see “2007 NAICS

definitions.”)

10 William C. Goodman, “Employment in hospitals: unconventional 

patterns over time,” Monthly Labor Review, June 2006, pp. 3–14 especially p. 5), http://www.bls.gov/opub/mlr/2006/06/art1full.pdf.

11 See “Table 1.1.6. Real Gross Domestic Product, Chained Dollars 

[Billions of chained (2005) dollars], seasonally adjusted at annual rates, 

1947 Quarter I to 2010 Quarter II” (Bureau of Economic Analysis, 

September 2010), http://www.bea.gov/national/index.htm#gdpC 

(visited Mar. 8, 2011).

12 Goodman, “Employment in hospitals,” p. 7.

13 “Table 1.1.6. Real Gross Domestic Product.” 

14 Goodman, “Employment in hospitals,” pp 8–9.5

15 See Lisa Hetzel and Annetta Smith, The 65 Years and Over Population: 2000, Census 2000 Brief (U.S. Census Bureau, October 2001), 

http://www.census.gov/prod/2001pubs/c2kbr01-10.pdf (visited Dec. 

12, 2010).

16 See “Table 102. Expectation of Life at Birth, 1970 to 2006, and 

Projections, 2010 to 2020” (U.S. National Center for Health Statistics, 

Centers for Disease Control and Prevention, no date), http://www.

census.gov/compendia/statab/2010/tables/10s0102.pdf (visited Dec. 

12, 2010).