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The United States Labor Market: Status Quo or A New Normal?

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  • Edward P. Lazear
  • James R. Spletzer

Abstract

The recession of 2007-09 witnessed high rates of unemployment that have been slow to recede. This has led many to conclude that structural changes have occurred in the labor market and that the economy will not return to the low rates of unemployment that prevailed in the recent past. Is this true? The question is important because central banks may be able to reduce unemployment that is cyclic in nature, but not that which is structural. An analysis of labor market data suggests that there are no structural changes that can explain movements in unemployment rates over recent years. Neither industrial nor demographic shifts nor a mismatch of skills with job vacancies is behind the increased rates of unemployment. Although mismatch increased during the recession, it retreated at the same rate. The patterns observed are consistent with unemployment being caused by cyclic phenomena that are more pronounced during the current recession than in prior recessions.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18386.

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Date of creation: Sep 2012
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Handle: RePEc:nbr:nberwo:18386

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  1. Abraham, Katharine G & Katz, Lawrence F, 1986. "Cyclical Unemployment: Sectoral Shifts or Aggregate Disturbances?," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 94(3), pages 507-22, June.
  2. Hilary Hoynes & Douglas L. Miller & Jessamyn Schaller, 2012. "Who Suffers during Recessions?," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 26(3), pages 27-48, Summer.
  3. Bentolila, Samuel & Bertola, Giuseppe, 1990. "Firing Costs and Labour Demand: How Bad Is Eurosclerosis?," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 57(3), pages 381-402, July.
  4. Fernando Ferreira & Joseph Gyourko & Joseph Tracy, 2011. "Housing Busts and Household Mobility: An Update," NBER Working Papers 17405, National Bureau of Economic Research, Inc.
  5. Jesse Rothstein, 2012. "The Labor Market Four Years into the Crisis: Assessing Structural Explanations," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 65(3), pages 437-500, July.
  6. Kyle F. Herkenhoff & Lee E. Ohanian, 2011. "Labor Market Dysfunction During the Great Recession," NBER Working Papers 17313, National Bureau of Economic Research, Inc.
  7. Steven J. Davis & R. Jason Faberman & John C. Haltiwanger, 2010. "The Establishment-Level Behavior of Vacancies and Hiring," NBER Working Papers 16265, National Bureau of Economic Research, Inc.
  8. Marcello M. Estevão & Evridiki Tsounta, 2011. "Has the Great Recession Raised U.S. Structural Unemployment?," IMF Working Papers, International Monetary Fund 11/105, International Monetary Fund.
  9. Daniel Aaronson & Jonathan Davis & Luojia Hu, 2012. "Explaining the decline in the U.S. labor force participation rate," Chicago Fed Letter, Federal Reserve Bank of Chicago, Federal Reserve Bank of Chicago, issue Mar.
  10. Lilien, David M, 1982. "Sectoral Shifts and Cyclical Unemployment," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 90(4), pages 777-93, August.
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As found by EconAcademics.org, the blog aggregator for Economics research:
  1. 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
  2. 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
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Cited by:
  1. Neil Mehrotra & Dmitriy Sergeyev, 2013. "Sectoral Shocks, the Beveridge Curve and Monetary Policy," 2013 Meeting Papers, Society for Economic Dynamics 919, Society for Economic Dynamics.
  2. Pascal Michaillat & Emmanuel Saez, 2014. "Aggregate Demand, Idle Time, and Unemployment," Discussion Papers, Centre for Macroeconomics (CFM) 1419, Centre for Macroeconomics (CFM).
  3. Richard B. Freeman, 2013. "Failing the Test? The Flexible U.S. Job Market in the Great Recession," NBER Working Papers 19587, National Bureau of Economic Research, Inc.
  4. Ulf Rinne & Klaus F Zimmermann, 2013. "Is Germany the North Star of Labor Market Policy?," IMF Economic Review, Palgrave Macmillan, Palgrave Macmillan, vol. 61(4), pages 702-729, December.
  5. Summerfield, Fraser, 2014. "Labor Market Conditions, Skill Requirements and Education Mismatch," CLSSRN working papers, Vancouver School of Economics clsrn_admin-2014-19, Vancouver School of Economics, revised 28 Apr 2014.
  6. Razzak, Weshah, 2013. "New Zealand Labour Market Dynamics Pre- and post-global financial crisis," MPRA Paper 52462, University Library of Munich, Germany.
  7. Peter A. Diamond, 2013. "Cyclical Unemployment, Structural Unemployment," NBER Working Papers 18761, National Bureau of Economic Research, Inc.
  8. repec:fip:fedfsp:y:2013:i:jan.14 is not listed on IDEAS
  9. Robert J. Gordon, 2013. "The Phillips Curve is Alive and Well: Inflation and the NAIRU During the Slow Recovery," NBER Working Papers 19390, National Bureau of Economic Research, Inc.
  10. Philippe Bergevin, . "Still Standing in Line: Addressing a Mismatch of Skills and Jobs in the Canadian Labour Market," e-briefs, C.D. Howe Institute 154, C.D. Howe Institute.
  11. Olivier J. Blanchard & Florence Jaumotte & Prakash Loungani, 2013. "Labor Market Policies and IMF Advice in Advanced Economies during the Great Recession," IMF Staff Discussion Notes, International Monetary Fund 13/02, International Monetary Fund.
  12. John C. Williams, 2013. "The economy and monetary policy in uncertain times," Speech, Federal Reserve Bank of San Francisco 115, Federal Reserve Bank of San Francisco.
  13. Valletta, Robert G., 2013. "House lock and structural unemployment," Labour Economics, Elsevier, Elsevier, vol. 25(C), pages 86-97.
  14. Menzie D. Chinn & Laurent Ferrara & Valérie Mignon, 2013. "Post-recession US Employment through the Lens of a Non-linear Okun’s law," NBER Working Papers 19047, National Bureau of Economic Research, Inc.
  15. Peter Cappelli, 2014. "Skill Gaps, Skill Shortages and Skill Mismatches: Evidence for the US," NBER Working Papers 20382, National Bureau of Economic Research, Inc.

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