Weathering the Great Recession: Variation in Employment Responses, by Establishments and Countries

Abstract

This paper finds that U.S. employment changed differently relative to output in the Great Recession and recovery than in most other advanced countries or in the United States in earlier recessions. Instead of hoarding labor, U.S. firms reduced employment proportionately more than output in the Great Recession, with establishments that survived the downturn contracting jobs massively. Diverging from the aggregate pattern, U.S. manufacturers reduced employment less than output while the elasticity of employment to gross output varied widely among establishments. In the recovery, growth of employment was dominated by job creation in new establishments. The variegated responses of employment to output challenges extant models of how enterprises adjust employment over the business cycle.

Keywords

• Great Recesion
• job loss
• employment
• labor hoarding
• cyclical employment patterns