Potential Effects of the Great Recession on the U.S. Labor Market

The effect of the Great Recession on the U.S. labor market will likely persist even after economic output has recovered. Although the Great Recession did not greatly change the relative probabilities of job loss for different types of workers, the long-run impact will vary by worker characteristics. Workers who lost long-term jobs during the recession are at increased risk of future job loss due to the loss of protection afforded by long job tenure, and older displaced workers are at relatively high risk of prolonged spells of unemployment and premature retirement. The recent increase in the job vacancy rate with relatively little change in the unemployment rate suggests a decrease in the efficiency of job matching and an increase in the NAIRU. However, this phenomenon may pass once aggregate demand has increased enough to bring vacancy rates back within their normal range and extended unemployment insurance programs have expired.