Recessions Happen: Now What?

Marta Burgin , Andrew A. Pack

Since the start of the recession in 2007, a lot has changed in the Federal Reserve’s Eighth District and the entire United States. Most startling are the high unemployment numbers combined with state and local budget deficits. With communities in the Eighth District seeing double-digit unemployment numbers and decreased budgets for many programs, what types of policies can help individuals and communities manage the aftermath of the current recession?

Moreover, although it may be difficult to think about the next recession as we attempt to move out of this one, the reality is that recessions happen. They are a natural and inevitable part of the economic cycle. Therefore, it is also important to consider what types of policies can help individuals and communities better hedge against and weather recessions in the future.

An important component to communities’ economic recovery and resilience will be the ability to meet demand for a suitable workforce. Therefore, some of the most critical policies for the United States and the Eighth District leading out of the recession will likely center around education, workforce development and regional approaches to job growth.

In a recent study, The Effects of Recessions Across Demographic Groups, St. Louis Fed economist Howard J. Wall examines the total effects of recessions (current and past) across a range of demographic categories: sex, race, age, marital status and educational level.[1] Among Wall’s key findings is the link between educational attainment and how a recession affects employment in any demographic group. The study points to the fact that, regardless of other demographic indicators, the higher level of education a person possesses, the less likely the person is to have lost their job during the recession. In fact, during the recession, employment for those with some college or a bachelor’s degree increased. On the other hand, unemployment for people without a high school diploma or only a high school diploma was accelerated by the recession.

Transitioning out of the recession, it will be important for communities to have people with higher levels of education because of the job skills such people offer. The types of higher education experiences that are needed are varied—ranging from traditional degree-bearing higher education programs to various training, certification and retraining programs.

For example, according to the Bureau of Labor Statistics, half of all jobs in the fastest-growing industries from 2006 to 2016 will require a bachelor’s or some form of higher degree. Having said that, for 28 of the 30 jobs that will see the biggest declines between 2006 and 2016, on-the-job training is actually the most important form of education. In addition, a recent article in USA Today noted that 71 percent of laid-off workers are seeking work in other job fields. The economic stimulus package contains nearly $4 billion over the next three years to help retrain and to place laid-off workers into new careers.

Communities and individuals that prepare for future recessions now by placing a high value on education and increasing access to education will be better equipped to weather future recessions. (See Howard Wall study, Figure 18.) Communities in the Eighth Federal Reserve District understand the importance of education to economic resilience and attainment and are undertaking efforts to not only manage the effects of this recession, but to prepare for the future as well.

In Louisville, KentuckianaWorks has received $3 million from the economic stimulus to train and re-train laid-off workers.[2] Part of the money will fund KentuckianaWorks scholarships that will help workers complete a certificate program, associate or bachelor’s degree. Laid-off workers may receive up to $4,000 for tuition and $600 for books and supplies over a two-year period. It is important as we rise out of the recession and attempt to create a stronger future economy that communities and states in the Eighth District have the ability to leverage federal funds for improving and retraining the workforce.

CareerPlace in Memphis is also helping to reconnect people to the workforce by offering programs that connect people with businesses.[3] Porter-Leath, the nonprofit group that operates CareerPlace, started the job readiness program last year. Opportunities range from internships to permanent jobs. The program also helps participating businesses receive tax credits for hiring workers. Those responsible for creating CareerPlace believe that helping individuals gain more experience will help them attain better jobs and have the skills to weather future recessions.

Workforce partnerships and sector-based approaches can be critical to a community’s or region’s ability to grow, attract and retain jobs. Partnerships with those in the business community, educational institutions, workforce organizations, nonprofits and other community groups not only create a more effective way of sharing resources, but also foster a collaborative approach to improving the regional economy. Working with the business community and other organizations can help better match workers and talent to specific jobs and industries in the region.

The St. Louis Regional Chamber and Growth Association (RCGA) recently rolled out its new four-part regional plan for post-recession recovery.[4] One of the most important parts of the plan is to attract, develop and retain top talent in the region. RCGA’s “Bounce Back St. Louis Program” is one component in creating a city that uses its regional strengths and networks to develop a competitive workforce in the post-recession economy.[5] “Bounce Back St. Louis” brings together people in business, education, professional associations and career centers through career forums, talent groups, partnerships, social networks and a web site that acts as a hub to keep people informed and connected. Creating regional networks to increase the talent and skills of the St. Louis workforce will help St. Louis during future recessions.

Regional groups such as the Metro Little Rock Alliance and the Little Rock Regional Chamber of Commerce have been critical in working together to create jobs.[6], [7] Little Rock has one of the lowest unemployment rates of any city in the United States. Little Rock’s regional approach to job creation has resulted in job growth even amidst a deep recession. During 2007 and 2008, Little Rock had a record amount of new capital investment, with almost $1 billion in new investments during the early part of the recession. Recently, the Little Rock area has attracted jobs in the aviation, energy and steel industries. Bringing together regional resources and assets is imperative for communities wanting to build more resilient economies after the recession.

As Wall’s report details, the recession has had a significant impact on many groups of people, and the impact is varied. We cannot always control what will happen during a recession, but we can better equip ourselves to have power over what we can somewhat control: our educational attainment. Recessions will happen, but people and communities must plan and prepare for future recessions now. Education, workforce development and regional approaches to job growth are three interrelated issues that will bolster more stable communities in future recessions.

Unemployment in 8th District (SA*,%)


MSA Dec-07 Sep-09
Little Rock 4.3 6.2
St. Louis 5.8 10.2
Louisville 5.7 10.6
Memphis 5.8 10.1
United States 4.9 9.8

* Seasonally adjusted

Endnotes

  1. “Total effects” of a recession on a particular demographic group are direct employment change plus foregone employment. For a full discussion, see The Effects of Recessions Across Demographics Groups (Wall 2009) [back to text]
  2. www.kentuckianaworks.org [back to text]
  3. www.porter-leath.org/content.php?id=156 [back to text]
  4. www.stlrcga.org [back to text]
  5. http://www.bouncebackstl.com/ [back to text]
  6. www.metrolittlerockalliance.com [back to text]
  7. www.littlerockchamber.com/cwt/external/wcpages/index.aspx [back to text]

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