Answer:
As 1981 began, the Federal Reserve reported that there would be little or no economic growth in 1981, as interest rates were to continue rising in an attempt to reduce inflation.
After failing to gain traction during the weak and brief recovery from the 1980 downturn, weakness in manufacturing and housing caused by rising interest rates began to have an expanded effect on related sectors beginning in mid-1981. Job losses resumed, this time expanding to nearly all employment sectors through the end of 1982. Goods-producing sectors were hardest hit: 90% of all job losses in 1982 came from manufacturing, despite this sector making up only 30% of total non-farm employment. The machinery industry shed 400,000 jobs. Transportation equipment manufacturing fell by 180,000 jobs. Layoffs in electrical and electronics manufacturing exceeded 100,000. The mining sector shed 150,000 jobs, likely a result of high commodity prices and cratering demand from the recession. Construction shed a total of 385,000 jobs from July 1981 through December 1982. Non-durable goods manufacturing (e.g. textiles, rubber, apparel, plastics, tobacco, food, etc.), already under pressure since the mid-1970s, suffered some 365,000 job cuts.
The unemployment rate for auto workers rose from just 3.8% in early-1978 to 24% by the end of 1982; construction worker unemployment peaked at 22% during the same time.
The services sector, while not hit nearly as hard as manufacturing, shed 400,000 jobs during the recession, with sharp declines in transportation, utilities, state & local governments, and wholesale and retail trade. However, the finance, insurance, and real estate sector gained 35,000 jobs over the duration of the recession.
The heavy losses in manufacturing and construction, contrasted with more minor losses in services, also affected the unemployment rates for men and women differently. While the increases in unemployment for both sexes were roughly equal during the recession of 1973-1975 recession, the unemployment rate for men increased 4.5 percentage points during the 1981-1982 recession, while women suffered a comparatively more mild 2.5 percentage point increase in joblessness. Between the fall of 1981 and the end of 1982, nearly 70% of the increase in unemployment came from men's unemployment.
Unemployment had changed very little in the period between the end of the 1980 recession and the July 1981 start of the second, never dropping below 7.2%. Unemployment rose to double digits for the first time since 1941 in September 1982, and stood at a postwar high of 10.8% by the end of the year. The total increase in unemployment was 3.6%, which was less than the 1973–75 recession increase of 3.8%, yet still higher than the 2.9% average. Because the recession began with already elevated levels of unemployment, the increase easily pushed it higher than any other post-war recession. Overall, the recession caused the loss of 2.9 million jobs, representing a 3.0% drop in payroll employment, the largest percentage decline since the 1957–1958 recession. The number of underemployed workers (those who are working part-time but want full-time work) rose to the highest number ever recorded at that time since data collection began in 1955.
Unemployment was particularly severe amongst teenagers and racial minorities: the unemployment rates for black Americans peaked at 20% in December 1982, compared to 15% for Latinos and 9.3% for white Americans. Teen unemployment hit 24%, and was particularly severe amongst black teenagers: for most of 1982, unemployment for black teenagers stayed at roughly 50%.
Ronald Reagan, who had assumed office in January 1981, brought his own economic plan to the table. In August 1981, the president signed the Economic Recovery Tax Act of 1981, a three-year tax cut plan. As the recession deepened in 1982, Reagan's approval rating also dropped. As a result, during the 1982 midterm elections, Republican gains made in the House of Representatives during the 1980 election were reversed. However, control of the Senate was retained by the Republicans.