Two Recessions, Two Recoveries
Compare the two longest episodes in U.S. history with our interactive
The Great Recession of 2007-2009 was one of the deepest downturns of the U.S. economy since World War II. Triggered by crises in the housing and financial markets, the recession evokes memories of homes in foreclosure, the collapse of Lehman Brothers, and bailouts for businesses in the auto, banking and financial sectors.
The subsequent expansion began in July 2009 and is now at 125 months and counting, making it the longest economic recovery dating back to the mid-19th century. Yet, homeownership and family wealth are struggling to rebound, and the presidential campaigns of Sens. Bernie Sanders and Elizabeth Warren manifest growing concern with economic inequities. A leading economist has labeled this an era of “secular stagnation.”
This is different from the more optimistic public mood of the 1990s, the only other time the U.S. experienced a decade-long economic expansion. Following a recession that coincided with the Gulf War of 1990-1991, the expansion sent the homeownership rate and family wealth on the way to record highs. Even as the public was witness to the dot-com bubble and the rise of AOL millionaires, the Occupy Wall Street movement would not emerge for another decade. Alan Greenspan, then chairman of the Federal Reserve, seemed to find the mood too buoyant, warning of “irrational exuberance.”
Comparing the two economic expansions
The recovery from the Great Recession fell short in lifting the incomes of many households. Overall, the median U.S. household income increased by 15% from 1991 to 2000, but by only 11% from 2009 to 2018 (estimates for 2019 are not yet available).
The disparity was much greater for certain groups. The median income of households with female heads increased by 37% from 1991 to 2000, compared with 13% from 2009 to 2018. For households headed by blacks, median income increased by 32% and 12% over the two periods, respectively.
Moreover, the gains in the current recovery have been so modest for some households that their incomes in 2018 are no higher or in some cases even lower than their incomes in 2000. For example, the median income of households whose heads had only a high school education was $54,400 in 2018, compared with $60,200 in 2000. The same is true of households whose heads had not completed high school or who attended college but not completed a four-year program. Households whose heads held at least a bachelor’s degree had a median income of $116,500 in 2018, about the same as in 2000. (Incomes are adjusted for household size and expressed in 2018 dollars.)
The most notable achievement of the post-Great Recession era is the decline in the unemployment rate from a near record high level in 2010 to a near record low level in 2019. The drop, from 9.5% in 2010 to 3.5% in 2019, was much greater than observed in the recovery in the 1990s, which went from 8.1% in 1992 to 4.6% in 2001 (estimates are non-seasonally adjusted and refer to the second quarter of each year from 2010-2019 and the first quarter of each year from 1992 to 2001).
The improvement in the unemployment rate for black and Hispanic workers during the recovery from the Great Recession is especially notable. The unemployment rates fell precipitously from 2010 to 2019 for both groups – from 15.5% to 6.1% for black workers and from 11.9% to 3.9% for Hispanic workers – and are currently the lowest on record. But, as it has been historically, the unemployment rate among black and Hispanic workers remains higher than the rate among white and Asian workers.
Despite the downward trend in unemployment, the recovery in other labor market indicators has been anemic to absent in the post-Great Recession era. The U.S. employment rate in 2019 – the share of the population 16 and older that is employed – is several percentage points lower than it was at the start of the Great Recession in 2007. The principal reason is the aging of the U.S. population. The first wave of Baby Boomers (born in 1946) turned 65 in 2011, an age at which participation in the labor force, either by working or looking for work, drops steeply. Research suggests that aging can account for most of the decrease in labor force participation and the employment rate since the Great Recession. Labor force participation among men is also in long-run decline.
In contrast, the expansion in the 1990s is associated with record-high levels for the employment rate and the labor force participation rate. Baby Boomers (ages 37 to 55 in 2001) were in the prime of their working years and labor force participation among women was at a historic peak around 2000, propelled in part by The Personal Responsibility and Work Opportunity Reconciliation Act of 1996. As demographic forces reverse course and the effects of welfare reform recede into the past, the U.S. labor force participation rate and employment rate appear unlikely to return to their turn-of-the-century levels anytime soon, even as the recovery from the Great Recession extends its record-setting duration.
Whites, blacks and Asians include only the single-race, non-Hispanic component of those groups. Hispanics are of any race. Asians include Pacific Islanders. Other racial/ethnic groups are included in all totals but are not shown separately.
The labor force consists of people 16 and older who are either employed or unemployed (people without a job who are looking and available for work).
The labor force participation rate is the share of the working-age population (ages 16 and older) that is in the labor force.
The employment rate is the share of the working-age population that is employed.
The unemployment rate is the share of the labor force that is unemployed.
Household income is the sum of incomes received by all members of the household ages 15 and older. Income is the sum of earnings from work, capital income such as interest and dividends, rental income, retirement income, and transfer income (such as government assistance) before payments for such things as personal income taxes, Social Security and Medicare taxes, union dues, etc. Non-cash transfers, such as food stamps, health benefits, subsidized housing and energy assistance, are not included. More detail on the measurement and collection of data on income is available from the Census Bureau.
The data for this analysis are derived from the Current Population Survey (CPS). Conducted jointly by the U.S. Census Bureau and the Bureau of Labor Statistics, the CPS is a monthly survey of approximately 55,000 households and is the source of the nation’s official unemployment statistics. Estimates of the unemployment rate, employment rate and the labor force participation rate are derived on a quarterly basis by combining three monthly CPS surveys. This allows for larger sample sizes of smaller demographic groups, such as Asian workers.
Estimates of household income are from the CPS Annual Social and Economic Supplements (ASEC), which is conducted in March of every year and is the basis for the Census Bureau’s reports on income and poverty in the United States. The ASEC surveys collect data on the income of a household for the preceding calendar year. For example, the latest ASEC was conducted in 2019 and contains data on income from 2018.
The 2015 ASEC used a redesigned set of income questions, so the household income figures reported for calendar years 2014 to 2018 may not be fully comparable to earlier years. The 2014 ASEC tested the new redesigned income questions by asking the traditional income questions of five-eighths of the sample and the redesigned questions of the remaining three-eighths of the sample. Median household income for calendar year 2013 was $53,585 (in 2013 dollars) based on the redesigned income questions compared with an estimated $51,939 using the traditional income questions. The difference reflects both the different questionnaire and the different sampled households responding to the questionnaires.
Methodological revisions in the CPS may also have an impact on the trends in household income. In particular, the 1993 revisions have an impact on the comparability of income data before and after that date.
The sample for the analysis consists of the civilian, non-institutionalized population ages 16 and older.
Estimates of household income refer to the calendar year. Household incomes are adjusted for household size, scaled to reflect three-person households, and expressed in 2018 dollars using the Consumer Price Index Research Series (CPI-U-RS).
Estimates of the unemployment rate, employment rate and the labor force participation rate are for the first quarter of each year from 1989 to 2001 and for the second quarter of each year from 2007 to 2019, non-seasonally adjusted. The 1990-1991 recession lasted from July 1990 to March 1991, with the ending aligned with the first quarter of 1991. The Great Recession lasted from December 2007 to June 2009, with the ending aligned with the second quarter of 2009. Drawing comparisons across the same quarter in each year avoids the effect of seasonal fluctuations.
The CPS microdata used in this report are the Integrated Public Use Microdata Series (IPUMS) provided by the University of Minnesota. The IPUMS assigns uniform codes, to the extent possible, to data collected in the CPS over the years. More information about the IPUMS, including variable definition and sampling error, is available at http://cps.ipums.org/cps/documentation.shtml.
Graphics by Michael Keegan and Chris Baronavski