Advanced Search
MyIDEAS: Login to save this article or follow this journal

The trend growth rate of employment : past, present, and future

Contents:

Author Info

  • Todd E. Clark
  • Taisuke Nakata

Abstract

Over the course of the recovery from the 2001 recession, many forecasters have revised downward their expectations for job growth in the United States. The often disappointing pace of employment growth has been attributed to various forces, such as the high health-care costs faced by employers, structural changes causing some industries to decline, outsourcing of jobs from the United States to other countries, and strong productivity growth. Many of these explanations imply the sluggish pace of job gains to be the result of weakness in aggregate demand and labor demand. However, some observers have suggested that broad demographic changes affecting labor supply – such as the aging of the population – could account for part of the sluggishness of job growth. The demographic changes may have slowed the trend growth rate of employment. A change in trend would have important implications for fiscal and monetary policy. For fiscal policy, slower trend growth in employment will tend to result in slower long-term growth in tax revenues, with potentially important effects on government programs such as Social Security. For monetary policy, assessments of the state of labor markets and the overall economy compared to sustainable trends often figure prominently in monetary policy decisions. If trend job growth were to slow, actual growth in jobs that appears weak by historical standards could exceed the new trend rate. The course of monetary policy could differ substantially if job growth were correctly realized to be above trend rather than incorrectly assessed to be at or below trend. Therefore, accurate assessments of potentially changing trends are important to effective monetary policy. Clark and Nakata examine employment and labor force indicators for evidence of a slowing of trend employment growth in the United States. They conclude that declines in the growth rates of population and labor force participation have caused the trend growth rate of employment to slow. Over the next ten years, a reasonable baseline projection for trend job growth is 1.1 percent per year, or about 120,000 jobs per month.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.kansascityfed.org/Publicat/econrev/PDF/1q06clar.pdf
Download Restriction: no

Bibliographic Info

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

Volume (Year): (2006)
Issue (Month): Q I ()
Pages: 43-85

as in new window
Handle: RePEc:fip:fedker:y:2006:i:qi:p:43-85:n:v.91no.1

Contact details of provider:
Postal: One Memorial Drive, Kansas City, MO 64198
Phone: (816) 881-2254
Web page: http://www.kansascityfed.org
More information through EDIRC

Order Information:
Email:

Related research

Keywords: Employment ; Labor market ; Unemployment;

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Donald W.K. Andrews, 1990. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Cowles Foundation Discussion Papers 943, Cowles Foundation for Research in Economics, Yale University.
  2. Clemen, Robert T., 1989. "Combining forecasts: A review and annotated bibliography," International Journal of Forecasting, Elsevier, vol. 5(4), pages 559-583.
  3. Ronald Lee & Timothy Miller & Michael Anderson, 2004. "Stochastic Infinite Horizon Forecasts for Social Security and Related Studies," NBER Working Papers 10917, National Bureau of Economic Research, Inc.
  4. Timmermann, Allan, 2006. "Forecast Combinations," Handbook of Economic Forecasting, Elsevier.
  5. James H. Stock & Mark W. Watson, 2003. "Has the Business Cycle Changed and Why?," NBER Chapters, in: NBER Macroeconomics Annual 2002, Volume 17, pages 159-230 National Bureau of Economic Research, Inc.
  6. Elliott, Graham & Timmermann, Allan G, 2007. "Economic Forecasting," CEPR Discussion Papers 6158, C.E.P.R. Discussion Papers.
  7. Stacey L. Schreft & Aarti Singh, 2003. "A closer look at jobless recoveries," Economic Review, Federal Reserve Bank of Kansas City, issue Q II, pages 45-73.
  8. Pierre Perron† & Tatsuma Wada, 2005. "Let’s Take a Break: Trends and Cycles in US Real GDP?," Boston University - Department of Economics - Working Papers Series WP2005-031, Boston University - Department of Economics, revised Oct 2005.
  9. Perron, P. & Bai, J., 1995. "Estimating and Testing Linear Models with Multiple Structural Changes," Cahiers de recherche 9552, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  10. Athanasios Orphanides & John C. Williams, 2002. "Robust monetary policy rules with unknown natural rates," Working Paper Series 2003-01, Federal Reserve Bank of San Francisco.
  11. Orphanides, Athanasios, 1999. "The Quest for Prosperity Without Inflation," Working Paper Series 93, Sveriges Riksbank (Central Bank of Sweden).
  12. Stuart E. Weiner, 1993. "New estimates of the natural rate of unemployment," Economic Review, Federal Reserve Bank of Kansas City, issue Q IV, pages 53-69.
  13. George A. Kahn, 1993. "Sluggish job growth: is rising productivity or an anemic recovery to blame?," Economic Review, Federal Reserve Bank of Kansas City, issue Q III, pages 5-25.
  14. David E. Lebow & Jeremy B. Rudd, 2003. "Measurement Error in the Consumer Price Index: Where Do We Stand?," Journal of Economic Literature, American Economic Association, vol. 41(1), pages 159-201, March.
  15. Maria W. Otoo, 1999. "Temporary employment and the natural rate of unemployment," Finance and Economics Discussion Series 1999-66, Board of Governors of the Federal Reserve System (U.S.).
  16. Katharine Bradbury, 2005. "Additional slack in the economy: the poor recovery in labor force participation during this business cycle," Public Policy Brief, Federal Reserve Bank of Boston.
  17. George L. Perry, 1971. "Labor Force Structure, Potential Output, and Productivity," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 2(3), pages 533-578.
  18. Richard Johnson, 2002. "The puzzle of later male retirement," Economic Review, Federal Reserve Bank of Kansas City, issue Q III, pages 5-26.
  19. Olivier Blanchard & John Simon, 2001. "The Long and Large Decline in U.S. Output Volatility," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 32(1), pages 135-174.
  20. Joseph F. Quinn, 1999. "Has the Early Retirement Trend Reversed?," Boston College Working Papers in Economics 424, Boston College Department of Economics.
  21. Chang-Jin Kim & Charles R. Nelson, 1999. "Has The U.S. Economy Become More Stable? A Bayesian Approach Based On A Markov-Switching Model Of The Business Cycle," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 608-616, November.
  22. Douglas Staiger & James H. Stock & Mark W. Watson, 1997. "The NAIRU, Unemployment and Monetary Policy," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 33-49, Winter.
  23. Mise, Emi & Kim, Tae-Hwan & Newbold, Paul, 2005. "On suboptimality of the Hodrick-Prescott filter at time series endpoints," Journal of Macroeconomics, Elsevier, vol. 27(1), pages 53-67, March.
  24. Julio J. Rotemberg, 1999. "A Heuristic Method for Extracting Smooth Trends from Economic Time Series," NBER Working Papers 7439, National Bureau of Economic Research, Inc.
  25. Julie L. Hotchkiss, 2005. "What’s up with the decline in female labor force participation?," Working Paper 2005-18, Federal Reserve Bank of Atlanta.
  26. Sharon Kozicki, 2004. "How do data revisions affect the evaluation and conduct of monetary policy?," Economic Review, Federal Reserve Bank of Kansas City, issue Q I, pages 5-38.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. C. Alan Garner, 2008. "Is commercial real estate reliving the 1980s and early 1990s?," Economic Review, Federal Reserve Bank of Kansas City, issue Q III, pages 89-115.
  2. Riccardo DiCecio & Kristie M. Engemann & Michael T. Owyang & Christopher H. Wheeler, 2008. "Changing trends in the labor force: a survey," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 47-62.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:fip:fedker:y:2006:i:qi:p:43-85:n:v.91no.1. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (LDayrit).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.