Why The Great Recession Was Different

Did you know that the United States lost more jobs during the 2001 recession than during the Great Recession?

It's true. In the worst three quarters of the 2001 recession the U.S. economy lost 26.1 million jobs. In the worst three quarters of the Great Recession, the economy lost 25.1 million jobs.

The reason the Great Recession was remarkable was not because of the job losses. It was because the spike in job losses coupled with a lack of job gains.

In the monthly employment releases, people are told how many jobs exist in the U.S. and whether the economy gained or lost a specific amount of jobs in the month. By this measure, the Great Recession was much larger than the 2001 recession. But comparing monthly snapshot of the economy masks the numbers of jobs that are always being added and lost every month.

Let’s say that you own an auto repair shop and a flower business. Unfortunately, the flower business falls under hard times and you close it, laying off three employees. The auto repair business takes off and you hire three new mechanics. The monthly job reports would show that there was no net job change in the economy. Yet three people lost their jobs and another three people got jobs.

The Great Recession was characterized by a record drop in expansions and openings coupled with the general recessionary spike in job losses. In other words, there was the typical number of florists closings, but an atypical drop in the mechanic hirings.