Weathering the Great Recession: Variation in Employment Responses by Establishments and Countries

This paper finds that US employment changed differently relative to output in theGreat Recession and recovery than in most other advanced countries or in the US in earlierrecessions. Instead of hoarding labor, US firms reduced employment proportionately morethan output in the Great Recession, with establishments that survived the downturncontracting jobs massively. Diverging from the aggregate pattern, US manufacturers reducedemployment less than output while the elasticity of employment to gross output varied widelyamong establishments. In the recovery, growth of employment was dominated by job creationin new establishments. The variegated responses of employment to output challenges extantmodels of how enterprises adjust employment over the business cycle.