Some claim that recent labor market regulations are to blame for a slow labor market recovery from the Great Recession. However, comparing this recovery to the one following the 2001 recession casts doubt on that claim, according to a recent Economic Synopses essay.
Vice President and Deputy Director of Research B. Ravikumar and Lin Shao, a recent graduate student at Washington University in St. Louis, compared labor costs per hour and per employed person following the 2007-09 recession with costs following the 2001 recession.1 They also compared the recent recovery with the long-run average for labor costs.
They found that labor cost per hour rose about 5 percent after the 2001 recession, but was essentially flat after the 2007-09 recession. The pattern was similar for labor cost per employed person.
Ravikumar and Shao also examined trends in total hours worked and total employed persons following the two recessions. They noted that “both measures grew faster after the 2007-09 recession than after the 2001 recession.” In particular, total hours worked grew 8 percent following the 2007-09 recession but only 5 percent after the 2001 recession. (For charts showing these trends in labor costs, hours worked and employed persons, see the Economic Synopses essay “Have Labor Costs Slowed the Recovery?”)
The authors noted that growth in labor costs was less after the 2007-09 recession than the long-run average:
Ravikumar and Shao concluded by noting that, compared with the recovery from the 2001 recession, labor costs have increased slower and total hours worked and total employed persons have increased faster. “Hence, the aggregate data cast doubt on the proposition that an increase in labor costs due to labor market regulations has been the reason for the slow recovery from the 2007-09 recession.”
1 The authors calculated labor cost per hour by dividing real total labor compensation by total hours worked and calculated labor cost per employed person by dividing real total labor compensation by the total number of employed persons.
The St. Louis Fed uses Disqus software for the comment functionality on this blog. You can read the Disqus privacy policy. Disqus uses cookies and third party cookies. To learn more about these cookies and how to disable them, please see this article.
Get notified when new content is available on our On the Economy blog.
The St. Louis Fed On the Economy blog features relevant commentary, analysis, research and data from our economists and other St. Louis Fed experts.
Views expressed are not necessarily those of the Federal Reserve Bank of St. Louis or of the Federal Reserve System.
For media-related questions, email mediainquiries@stls.frb.org. For all other blog-related questions or comments, email on-the-economy@stls.frb.org.
- Vulgar, obscene, profane or otherwise disrespectful or discourteous
- For commercial use, including spam
- Threatening, harassing or constituting personal attacks
- Violating copyright or otherwise infringing on third-party rights
- Off-topic or significantly political
The St. Louis Fed will only respond to comments if we are clarifying a point. Comments are limited to 1,500 characters, so please edit your thinking before posting. While you will retain all of your ownership rights in any comment you submit, posting comments means you grant the St. Louis Fed the royalty-free right, in perpetuity, to use, reproduce, distribute, alter and/or display them, and the St. Louis Fed will be free to use any ideas, concepts, artwork, inventions, developments, suggestions or techniques embodied in your comments for any purpose whatsoever, with or without attribution, and without compensation to you. You will also waive all moral rights you may have in any comment you submit.