The collapse of the housing bubble in 2007 and 2008 caused a deep recession, which sent the unemployment rate to 10.0% in Oct. 2009—more than double its pre-crisis rate. Since then, the unemployment rate had fallen to below its pre-crisis lows, indicating that the spike in unemployment was cyclical. There is an argument to be made, however, that the Great Recession caused an increase in structural unemployment.

What Is Structural Unemployment?

Unlike cyclical unemployment, 澳洲幸运5官方开奖结果体彩网:structural unemployment is not directly correlated to the business cycle but is a chronic response to broad economic shifts. If someone loses their job as a real estate agent because of a downturn in the housing market, then finds another job as the market picks up, they have experienced 澳洲幸运5官方开奖结果体彩网:cyclical unemployment. If someone loses their job as an elevator operator because elevators have become automated, they are experiencing structural unemployment. (Both forms contrast to 澳洲幸运5官方开奖结果体彩网:frictional unemployment, the unavoidable resܫult of imperfect inf🔯ormation in a healthy labor market.)

According to one line of thinking, the Great Recession caused such profound disruption in some areas of the country that local economies contracted permanently and local industries fizzled out or moved elsewhere. Structural unemployment increased as a result: people, particularly the low-skilled, were unable to find jobs without moving or entering a new industry, which often proved too difficult due to economic, educational, or other barriers. The housing crisis—the immediate cause of the 澳洲幸运5官方开奖结果体彩网:Great Recession—made mat♍ters 🐲worse by tying people to houses they could not sell without losing money.

Measuring Structural Unemployment

Structural unemployment is difficult to measure, but there are hints in the data that the spike in unemployment following the crisis was not purely cyclical. While the headline 澳洲幸运5官方开奖结果体彩网:unemployment rate (the one mentioned above, also known as U-3) had fully recovered, other measures did not. U-1, which measures the share of the labor force that has been unemployed for 15 weeks or longer, remained above its pre-crisis low; this measure of chronic unemployment may provide a window into the level of structural unemployment. Similarly, U-6, which includes those who have given up looking for a job or have reluctantly settled for part-time work, remained above its pre-crisis low. 

Structural Unemployment and the Great Recession

A 2011 IMF working paper attempted to measure the Great Recession's effect on structural unemployment in the U.S and concluded that it had risen by around 1.75 percentage points from a pre-crisis level of 5%.

The paper also suggested that, as a result of the rise in structural unemployment, inflationary pressures would result from a fall in (U-3) unemployment to levels below around 7%. In the late 2010s, inflation remained subdued with unemployment rates below 5%. In fact, unemployment did not increase significantly until March 2020 due to the COVID-19 pandemic and resulting economic crisis and lockdown. 2020 unemployment spiked to levels not seen since the Great Depression.

While it is possible that structural unemployment is higher today than it was before the housing bubble burst, it is difficult to parse the causes of the increase. In the decade since the financial crisis began, automation has accelerated, pushing people out of manufacturing jobs. Competition from foreign producers♒, particularly in China, has increased.

Rents in big cities and the costs of higher education have increased rapidly, making it more difficult tꦬo enter the markets and industries where labor is in high demand. Some of these phenomena are themselves related to the crisis, arising in part from it or contributing to the direction it took. 

Structural Unemployment and COVID-19

Just as economists were beginning to understand the long-lasting impacts of the Great Recession, the global economy was shaken by the COVID-19 pandemic. Unemployment rates skyrocketed, businesses closed their doors, and a number of stimulus bills were passed in 𝓰the𒁏 first few months of the pandemic.

While the effects of the pandemic-related recession are still lingering, many professions have yet to return to pre-pandemic employment levels. It may be too early to determine whether or not these changes are cyclical or structural. However, after unemployment rates spiked in 2020 and remained elevated in 2021, certain unemployment levels for certain professions have yet to return to its prior low. Below are highlights from sectors for 2019, 2021, and 2023.

The Bottom Line

Did the Great Recession raise structural unemployment? There probably is no simple answer, but it is clear that the years following the 2008 financial crisis were marred by high unemployment and a 𒊎re-orientation of understanding and evaluating certain risks related to credit, real estate, and derivatives. These, in turn, may have modified the structure of the economy in such a way as to alter the job mark𒊎et.

Those interested in learning more about the Great Recession,𝔉 unemployment, and other financial topics may want to consider enrolling in one of the best investing courses currently available.