A Very Uneven Road: U.S. Labor Markets in the Past 30 Years

In the past three decades, the American economy has experienced large swings in performance, over shorter and longer time periods, and has undergone major structural changes. During the 1980s, we first endured a severe recession, engineered by the Federal Reserve Bank to fight high rates of inflation, and then recovered with a lengthy period of expansion and economic growth. Another and milder recession in the early 1990s was followed by an even more robust period of expansion, often called the “Great Boom” or the “Roaring Nineties,” during which high productivity and income growth returned to the U.S. economy. But in the decade of the 2000s, which once again began with a mild recession, the economic picture was more mixed; a shorter period of recovery, during which productivity growth was high but income growth was much lower, was followed by the most severe economic downturn since the 1930s, which is commonly known as the “Great Recession.” How did all of these economic forces play out in the U.S. labor market during this time period? In each economic cycle, how did trends in wages, employment and annual earnings reflect these economic developments? Which groups of workers benefited from economic growth, and which did not? Despite the periodic ups and downs in the economy, what long-term trends do we find in the labor market? And does the current severe downturn, from which our recovery will likely be painfully slow, change our long-term perceptions?