A Search and Matching Approach to Labor Markets: Did the Natural Rate of Unemployment Rise?
Abstract
The U.S. unemployment rate has remained stubbornly high since the 2007-2009 recession, leading some observers to conclude that structural rather than cyclical factors are to blame. Relying on a standard job search and matching framework and empirical evidence from a wide array of labor market indicators, we examine whether the natural rate of unemployment has increased since the recession began, and if so, whether the underlying causes are transitory or persistent. Our preferred estimate indicates an increase in the natural rate of unemployment of about one percentage point during the recession and its immediate aftermath, putting the current natural rate at around 6 percent. An assessment of the underlying factors responsible for this increase, including labor market mismatch, extended unemployment benefits, and uncertainty about overall economic conditions, implies that only a small fraction is likely to be persistent.Download Info
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Article provided by American Economic Association in its journal Journal of Economic Perspectives.
Volume (Year): 26 (2012)
Issue (Month): 3 (Summer)
Pages: 3-26
Note: DOI: 10.1257/jep.26.3.3
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Related research
Keywords:Find related papers by JEL classification:
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
- E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
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Citations
Blog mentions
As found by EconAcademics.org, the blog aggregator for Economics research:- Monetary or fiscal stimulus can help only if unemployment is cyclical; otherwise, if unemployment is structural expansionary policies will lead only to inflation. Careful recent analyses indicate that unemployment is mainly cyclical in the US
by Blog Admin in British Politics and Policy at LSE on 2012-10-24 16:00:33 - Given the enormity of the short- and long-run fiscal challenges facing the US, the lack of policy detail from both presidential candidates is disappointing
by Blog Admin in British Politics and Policy at LSE on 2012-10-25 13:00:36
Cited by:
- Murat Tasci, 2012. "The Ins and Outs of Unemployment in the Long Run: Unemployment Flows and the Natural Rate," Koç University-TUSIAD Economic Research Forum Working Papers 1233, Koc University-TUSIAD Economic Research Forum.
- John C. Williams, 2012.
"The economic outlook and challenges to monetary policy,"
Speech,
Federal Reserve Bank of San Francisco, issue July 9.
- John C. Williams, 2012. "The economic outlook and challenges to monetary policy," Speech, Federal Reserve Bank of San Francisco, issue July 12.
- John C. Williams, 2012. "The economic outlook and challenges to monetary policy," Speech, Federal Reserve Bank of San Francisco, issue Sep 24.
- John C. Williams, 2013. "The economy and monetary policy in uncertain times," Speech, Federal Reserve Bank of San Francisco, issue Jan. 14.
- Murat Tasci, 2012. "The ins and outs of unemployment in the long run: unemployment flows and the natural rate," Working Paper 1224, Federal Reserve Bank of Cleveland.
- John Fernald, 2012. "Productivity and potential output before, during, and after the Great Recession," Working Paper Series 2012-18, Federal Reserve Bank of San Francisco.
- John C. Williams, 2012. "The economic outlook and Federal Reserve policy," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue Oct 1.
- Bart Hobijn & Aysegül Sahin, 2012. "Beveridge curve shifts across countries since the Great Recession," Working Paper Series 2012-24, Federal Reserve Bank of San Francisco.
- Klinger, Sabine & Weber, Enzo, 2012. "Decomposing Beveridge curve dynamics by correlated unobserved components," IAB Discussion Paper 201228, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
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