Both the Great Recession of 2008 and the COVID-19 recession (which lasted from March 2020 to April 2020) ushered in waves of job losses and high unemployment. Economists often note that high unemployment is one of the top indicators of an economic recession or depression. However, there are some notable differences between the two eras, which may offer valuable clues to where the U.S. economy heads next.
Surprising many economists, the U.S. added more than half a million jobs in July 2022, bringing unemployment to its pre-pandemic low of just 3.5%. Additionally, wages rose, complicating the picture that some economists have painted of an economy moving toward a recession. In contrast, it took much longer for the unemployment rate to return to its pre-recession lows following the economic impacts of the Great Recession.
This is just one of several significant differences between the two periods of recent American economic history. Regarding the rate and duration of unemployment, a number of social and economic factors contributed to the gaps between the two time periods.
Read on for a look at all the ways the COVID-era unemployment trends compare to the last recession, along with some smart ideas about how to prepare in case the U.S. enters another recession.
Inside this article
The unemployment rate surged higher during COVID
The COVID-19 pandemic created the highest unemployment rate the U.S. had seen since the Great Depression. Lockdowns and social distancing were a major driver—when hotels, restaurants, sporting venues, theaters, offices, and other public areas temporarily shuttered, many workers in these sectors lost their jobs.
These industries account for a tremendous number of American jobs, which means that lockdowns caused unemployment to skyrocket. In contrast, the Great Recession shed jobs within specific companies, rather than the full-sale closure of industries, which accounts for a relatively lower peak unemployment rate.
Most people spent far less time unemployed after the pandemic hit
Why would pandemic-related unemployment have been on average shorter on average than during the Great Recession? Many pandemic-related job losses were related to relatively short-lived stay-at-home orders. When COVID-19 hit, many service industry workers were furloughed while their states were closed for business. But particularly in states that reopened relatively quickly, such as Florida, workers could get back to their jobs faster. The factors that influenced the Great Recession, however, were more complex and resulted in longer-lasting job disruptions.
In 2008, long-term unemployment dragged on
While many people returned to work relatively quickly during the COVID-19 pandemic, unemployment was a more intractable issue during the Great Recession. A significant number of Americans were out of work for more than 27 weeks. This is partly because larger macroeconomic forces—like (i.e., the financial market collapsing as the result of a housing bubble bursting—) contributed to the Great Recession versus the black swan event of the pandemic.
For people who are anxious about the country moving into another recession, lessons can be learned from 2008. Among these is bolstering an emergency fund, so the stress of unemployment isn't compounded by dwindling cash reserves.
The employment level returned to its pre-recession peak faster
Recent jobs reports have shown that as the pandemic has entered a less acute phase, the economy proved resilient, at least in terms of employment. Data released in August 2022 showed that the economy had recovered to its pre-pandemic employment levels.
More than half a million jobs were added in July alone, bringing the unemployment rate to just 3.5%. Additionally, wages rose 5.2% between July 2021 and July 2022, likely due to fast-rising inflation. This level of job and wage growth complicates some economists' predictions that the U.S. is heading toward a recession.