In the five years since the United States began its slow climb out of the deepest recession since the 1930s, the job market has undergone a substantial makeover. The middle class has lost ground as the greatest gains have occurred at the top and bottom of the pay scale, leaving even many working Americans living in poverty. The housing industry, once the primary engine of growth and a fountain of jobs, has shrunk, while health care, technology and energy have led the recovery.
After a long climb from the valley, the number of jobs has finally reached the previous peak of January 2008, with gains of more than 8.5 million jobs since early 2010. Still, the working-age population has grown substantially in the last six years, and the nation's economy, by reliable estimates, is at least seven million jobs below its potential. That has cost Americans hundreds of billions of dollars in lost output.
With the weak recovery from the recession, more than four million people are still considered among the long-term unemployed, out of work for at least half a year. They face considerably dimmer prospects of finding another job as their skills deteriorate and their contact with the world of work fades.
And that does not count the more than six million who have opted out of the labor force altogether, even taking into account demographic factors like the aging of the population.
Economists hope that many such people will be lured back to work as business improves and that wages will rise as the labor market tightens. But for now, the slack in the economy has served to hold down pay; wages for roughly four-fifths of American workers have declined since 2007, after adjusting for inflation.
A Shrinking, Shifting Middle Class
The downturn hit hard at industries that employ middle-wage workers, particularly those categories with large concentrations of men, and the subsequent recovery has done little to improve their position. More than 1.5 million construction jobs, paying wages of $55,120, on average, are still missing.
The manufacturing sector, which pays an average of $51,480 a year, has regained several hundred thousand jobs in the last couple of years but now employs 1.7 million fewer workers than it did before the recession.
By contrast, the health care sector has continued to thrive, expanding its role as a leading employer at all salary levels and emerging as the backbone of an evolving new middle class. Home services and outpatient centers grew the most, as the American population aged and health services shifted away from hospitals to less expensive ways of delivering care. And while the growth has slowed under pressure to keep costs down, health care services have added 1.5 million jobs and are expected to expand further.
Over all, industries whose average salaries are in the middle of the wage spectrum have shrunk by 2.5 million jobs.
Industrial Ruin and Revival
Change in private manufacturing jobs, by county
Black-Increase
Green-Decrease
Since the end of World War II, every recession has eliminated factories and cut jobs in manufacturing. But the most recent downturn was one of the worst, leaving the American economy with only about 12 million people working for manufacturing industries, 8.7 percent of the total number on payrolls.
By contrast, after a steep two-year drop that began in 2008, the total value of what the country makes is now back to where it was in 2007. As a result, companies doing business in the United States are producing their cars, airplanes, computer chips, turbines, household appliances and most everything else at fewer factories with many fewer workers.
That efficiency and high productivity provide many benefits. But because manufacturing jobs tend to pay better than those at retailers and restaurants — two sectors that have led the job expansion after the recession — the loss of so many factory positions is an important reason for the erosion of middle-wage jobs.
Manufacturing has recaptured a bit of momentum recently, with lower energy prices, a recovering auto industry and the return of some overseas production lifting employment by 600,000 from the trough four years ago.
While there will be bumps along the road, American industry will probably continue on the path of greater production of more valuable and sophisticated goods, relying on a shrinking share of the total work force.
For Many Americans, Not Much of a Recovery
While the richest Americans have generally recouped their losses from the recession and gained considerable new wealth during the recovery, the situation is bleaker for the poor and for low-wage workers than it was in 2007.
As work dried up and wages stagnated, tens of millions of Americans took jobs with lower pay and fewer hours, many of them turning to the federal government for additional support to help make ends meet.
The number of people receiving food stamps under the Supplemental Nutrition Assistance Program soared to 47.6 million in 2013 from 26.3 million in 2007. Incomes for the typical middle-income family have slipped, and the nation’s poverty rate remains above its prerecession level.
Benefiting From an Energy Bonanza
Even as much of American industry was suffering through the recession and anemic recovery, energy production was undergoing a stunning boom.
The middle of the country has been the prime beneficiary. Bolstered by hydraulic fracturing and other unconventional drilling methods, oil and natural gas output has surged, enriching traditional energy states like Texas as well as newer ones like North Dakota. (The effect can be seen in the map below, showing the change in all private employment by county.) Alternative energy sources like wind and solar have also gained.
Since 2007, employment in the oil and gas drilling business has surged by 60,000, to nearly 210,000, the highest level since “Dallas” was a hot television show in the 1980s and J.R. Ewing epitomized the swashbuckling oilmen of that time.
The combination of increased energy production and lower consumption, driven in part by efficiency gains, has led to much improvement in the country’s trade balance. Cheap natural gas has been a lifeline for manufacturers struggling to compete with overseas rivals; it has helped revive production in energy-intensive industries like chemicals and plastics.
Thriving Technology Proves a Magnet for Talent
As much of the rest of the economy clawed its way out of the recession, the technology industry emerged relatively unscathed. Today, it is thriving.
Social networking companies like Twitter and Facebook were just getting up and running in the years before the recession. Apple introduced its iPhone less than a year before the official start of the economic downturn in December 2007, setting off a wave of purchases of smartphones that have since come to dominate the market for mobile phones.
These technology companies, along with hundreds of others, generally managed to power through the hard times and have since emerged as prime drivers of the economy, creating tremendous wealth for a number of individuals and adding many well-paying jobs.
Silicon Valley, with its initial public offerings and billion-dollar acquisitions, isn’t showing any signs of slowing down. And those high-tech companies that capitalize on social media, cloud computing and big data are so appealing that they have even been luring business school graduates away from high-paying Wall Street jobs.
Employment Is Back Where It Started, but Not All Industries Fared the Same
Not all industries recovered equally over the past five years. Those that paid wages in the middle of the economic spectrum fared the worst over all, while low-paying industries hired the most during the recovery. Fast-food restaurants — which pay less than $22,000 a year, on average — added more jobs than nearly any other industry. Several high-paying areas also helped drive the recovery, including oil and gas extraction, computer programming, consulting, doctor’s offices and investment firms.
