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Okun Revisited: Who Benefits Most from a Strong Economy?

Author

Listed:
  • Stephanie R. Aaronson

    (Brookings Institution)

  • Mary C. Daly

    (Federal Reserve Bank of San Francisco)

  • William L. Wascher

    (Federal Reserve Board)

  • David W. Wilcox

    (Federal Reserve Board (Retired))

Abstract

Previous research has shown that the labor market experiences of less advantaged groups are more cyclically sensitive than the labor market experiences of more advantaged groups; in other words, less advantaged groups experience a high-beta version of the aggregate fluctuations in the labor market. For example, when the unemployment rate of whites increases by 1 percentage point, the unemployment rates of African Americans and Hispanics rise by well more than 1 percentage point, on average. This behavior is observed across other labor market indicators, and is roughly reversed when the unemployment rate declines. We update this work to include the post- Great Recession period and extend the analysis to consider whether these high-beta relationships change when the labor market is especially tight. We find suggestive evidence that when the labor market is already strong, a further increment of strengthening provides a modest extra benefit to some disadvantaged groups, relative to earlier in the labor market cycle. In addition, we provide preliminary evidence suggesting that these gains are somewhat persistent for African Americans and women.

Suggested Citation

  • Stephanie R. Aaronson & Mary C. Daly & William L. Wascher & David W. Wilcox, 2019. "Okun Revisited: Who Benefits Most from a Strong Economy?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 50(1 (Spring), pages 333-404.
    • Handle: RePEc:bin:bpeajo:v:50:y:2019:i:2019-01:p:333-404
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    2. Leila Bengali & Marcus Sander & Robert G. Valletta & Cindy Zhao, 2023. "Falling College Wage Premiums by Race and Ethnicity," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, vol. 2023(22), pages 1-6, August.
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