What makes this recovery different from other recoveries? Government, for one.
One notable fact about July’s so-so job numbers is that the private sector added 154,000 jobs. In isolation, that would be an okay, though not fantastic, number — it’s slightly more than the 125,000 new jobs the economy needs to keep up with population growth. But that bump was counteracted by the fact that the United States shed 37,000 public-sector jobs in July (mostly from the government shutdown in Minnesota). Which means, overall, employment is still stuck in neutral.
As it happens, this has been a persistent feature of the current downturn — and part of what makes this recovery different from previous recoveries. As the Economic Policy Institute’s Taylor Shapiro and Josh Bivens found in a recent paper, private-sector job growth after the 2007 recession hasn’t been stunning, but it’s actually been slightly stronger than job growth after the 2001 recession:
So why is the U.S. economy struggling so badly this time around? For one, of course, the 2007 recession was considerably more severe than the dot-com bubble burst. This has been a much deeper hole to crawl out of.
But another part of the story is that public-sector job losses have been much more severe this time around. As Shapiro and Bivens write: “Government employment is now 1.9 percent lower than it was at the start of the recovery, a drop of 430,000 jobs. In contrast, government employment rose by 1.1 percent (or 232,000 jobs) during the equivalent part of the last recovery.” Thanks to falling tax receipts and increases in unemployment and Medicaid, state and local governments have found themselves with glaring budget holes since 2008. They’re not allowed to run deficits and Congress declined to chip in enough aid to cover the shortfalls. So states and localities have been slashing government jobs at an unprecedented rate (a trend that will continue for the foreseeable future).
Another comparison: After the 1990 recession, the rate of private-industry job growth was slightly healthier than it is now, but the public sector was also expanding much faster — at an equivalent point in the early ’90s recovery, public-sector employment had grown 2.2 percent. “Largely because of the more favorable growth in government employment,” the authors write, “overall job creation during the recovery of the 1990s occurred at a faster pace (up by 1.3 percent over the first 23 months of the recovery) than during this recovery (a 0.4 percent increase).”
That’s certainly not the only reason this downturn differs from previous downturns. Carmen Reinhart and Kenneth Rogoff have argued that recessions spurred by financial crises are qualitatively different from normal recessions — and inherently take longer to rebound from. But government has been a big part of the story. Private-sector job growth hasn’t been uniquely horrible during the Obama years. Public-sector job losses, on the other hand, have been uniquely horrible. Coupled with the sheer size of the initial drop, it means that, for the United States to get back to full employment, we’ll need exceptional job growth in the private sector. And we’re nowhere close to that.