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Jobless recoveries and the wait-and-see hypothesis

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Author Info

  • Stacey L. Schreft
  • Aarti Singh
  • Ashley Hodgson

Abstract

In January 2005, after more than three years of sluggish employment growth, the U.S. economy finally recovered the jobs lost during the 2001 recession. Baffled by such a delayed rebound in payrolls, many speculated about the cause. Inevitably, observers compared the 2001 and 1991 recoveries, both widely considered to have been jobless. Schreft and Singh showed previously that one common feature of the first year of the jobless recoveries was the greater use of just-in-time employment practices. They also speculated that the greater availability of just-in-time employment practices contributed to the recoveries’ lack of job growth. This explanation of delayed hiring is termed the “wait-and-see hypothesis.” Flexible hiring practices allow firms to more easily adjust output in the short term without hiring full-time, potentially permanent workers. This practice is especially effective around the troughs of business cycles, when there is uncertainty about the strength of the recovery. As a result, firms are willing to wait to hire until they see sufficient improvement in business conditions to justify expanding payrolls. Schreft, Singh, and Hodgson take a longer-term perspective, considering the behavior of employment in the first three years of the jobless recoveries. They also describe how a wait-and-see approach to hiring can contribute to such recoveries

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Bibliographic Info

Article provided by Federal Reserve Bank of Kansas City in its journal Economic Review.

Volume (Year): (2005)
Issue (Month): Q IV ()
Pages: 81-99

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Handle: RePEc:fip:fedker:y:2005:i:qiv:p:81-99:n:v.90no.4

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Keywords: Employment;

References

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  1. Sushil Bikhchandani & David Hirshleifer & Ivo Welch, 2010. "A theory of Fads, Fashion, Custom and cultural change as informational Cascades," Levine's Working Paper Archive 1193, David K. Levine.
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Citations

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Cited by:
  1. Yılmaz AKYÜZ, 2004. "Managing financial instability and shocks," Iktisat Isletme ve Finans, Bilgesel Yayincilik, vol. 19(219), pages 5-17.
  2. Yilmaz Akyüz, 2009. "Mananging Financial Instability: Why Prudence is not Enough?," Working Papers 86, United Nations, Department of Economics and Social Affairs.
  3. Cristiano Cantore & Paul Levine & Giovanni Melina, 2013. "A Fiscal Stimulus and Jobless Recovery," IMF Working Papers 13/17, International Monetary Fund.
  4. Yilmaz Akyuz, 2008. "Managing Financial Instability in Emerging Markets: A Keynesian Perspective," Working Papers 2008/4, Turkish Economic Association.
  5. Bruno Dallago & Chiara Guglielmetti, 2011. "The Eurozone Crisis: Institutional Setting, Structural Vulnerability, and Policies," Openloc Working Papers 1112, Public policies and local development.
  6. Camacho, Maximo & Perez Quiros, Gabriel & Rodriguez Mendizabal, Hugo, 2011. "High-growth recoveries, inventories and the Great Moderation," Journal of Economic Dynamics and Control, Elsevier, vol. 35(8), pages 1322-1339, August.
  7. Michalis Nikiforos, 2013. "Employment Recovery? after the Great Recession," Economics Policy Note Archive 13-03, Levy Economics Institute.
  8. Regis Barnichon, 2009. "Demand-driven job separation: reconciling search models with the ins and outs of unemployment," Finance and Economics Discussion Series 2009-24, Board of Governors of the Federal Reserve System (U.S.).
  9. Edward S. Knotek II & Stephen Terry, 2009. "How will unemployment fare following the recession?," Economic Review, Federal Reserve Bank of Kansas City, issue Q III, pages 5-33.

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