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One of the most remarkable aspects of the current downturn is that total wage and salary income (inflation adjusted) has not risen at all in the last three years. Moreover, the total wages and salaries generated by the private sector have actually fallen by 1.7%. Meanwhile, domestic profits grew by 57.5%. In other recent downturns total wages and profits grew in tandem, with total wage and salary income up by 3.7% over a comparable three-year period and domestic profits up by 12.6%.
Productivity has grown far faster, increasing 13.6% so far in this cycle versus a 6.2% increase in the same period of the last three business cycles. This greater productivity growth, however, has not translated into faster hourly wage growth, which was only slightly faster in this period compared to other cycles (2.2% compared to a 1.3% decline).
Bush Administration's tax cuts falling short in job creation
The Bush Administration called the tax cut package, which was passed in May 2003 and took effect in July 2003, its "Jobs and Growth Plan." The president's economics staff, the Council of Economic Advisers (see background documents), projected that the plan would result in the creation of 5.5 million jobs by the end of 2004—306,000 new jobs each month, starting in July 2003. After eight months of falling considerably short of that projection, job gains for the month of March finally hit that level. For the nine months as a whole, however, the administration projected that a total of 2,754,000 jobs would be created after the tax cuts took effect. In fact, only 689,000 jobs were created over that period for a cumulative shortfall of 2,065,000 jobs.
Greatest sustained job loss since the Great Depression
Since the recession began 36 months ago in March 2001, 2.0 million jobs have disappeared, a 1.5% contraction. The Bureau of Labor Statistics began collecting monthly jobs data in 1939 (at the end of the Great Depression). In every previous episode of recession and job decline since 1939, the number of jobs had fully recovered to above the pre-recession peak within 31 months of the start of the recession. Today's labor market would have 3.4 million more jobs if jobs had grown by the 1.1% rate that occurred in the early 1990s recession and so-called "jobless recovery," the worst record prior to this current period. The picture is bleaker for private-sector jobs, which have dropped by 2.6 million since March 2001, a 2.5% contraction. (See state data and organizations for more information on your state.)
Since the official end of the recession in November 2001, total jobs have shrunk by 323,000 (an 0.2% contraction) and private-sector jobs have dropped by 560,000 (or 0.5%).
If you would like high-resolution versions of our current JobWatch charts, you can download these charts in press-optimized PDF format (2.4 MB).
Copyright © 2004 by The Economic Policy Institute. All rights reserved.
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