There is always an understandable focus on unemployment numbers. In any recession, this is where the true misery lies. However, the average number of hours worked can also provide some interesting insights into the timing and the depth of an economic slowdown.
The chart above illustrates recent trends in hours worked in US manufacturing. It peaked in the autumn of 2007. The following nine months, the number began to slowly decline. However, after the Lehman crash the number of hours worked crashed. In the first quarter of 2008, US manufacturing employees are working five percent fewer hours than they did back in the summer of 2007.
If we ignore productivity growth, this will reduce output by approximately the same amount. If we add to this decline the number of manufacturing jobs lost, then we begin to get a fuller picture of the dramatic collapse in US manufacturing output.
Perhaps more importantly, recent data shows absolutely no sign of turning around. The number of hours worked in manufacturing continues to decline sharply.