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Whatever Happened To The Business Cycle? A Bayesian Analysis Of Jobless Recoveries

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  • Engemann, Kristie M.
  • Owyang, Michael T.

Abstract

During the typical recovery from U.S. postwar period economic downturns, employment recovers to its prerecession level within months of the output trough. However, during the past two recoveries, employment has taken up to three years to achieve its prerecession benchmark. We propose a formal empirical model of business cycles with recovery periods to demonstrate that the past two recoveries have been statistically different from previous experiences. We find that this difference can be attributed to a shift in the speed of transition between business cycle regimes. Moreover, we find this shift results from both durable and nondurable manufacturing sectors losing their cyclical characteristics. We argue that this finding of acyclicality in post-1980 manufacturing sectors is consistent with previous hypotheses (e.g., improved inventory management) regarding the reduction in macroeconomic volatility over the same period. These results suggest a link between the two phenomena, which have heretofore been studied separately.

Suggested Citation

  • Engemann, Kristie M. & Owyang, Michael T., 2010. "Whatever Happened To The Business Cycle? A Bayesian Analysis Of Jobless Recoveries," Macroeconomic Dynamics, Cambridge University Press, vol. 14(5), pages 709-726, November.
    • Handle: RePEc:cup:macdyn:v:14:y:2010:i:05:p:709-726_99
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    References listed on IDEAS

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    1. Owyang, Michael T. & Piger, Jeremy & Wall, Howard J., 2008. "A state-level analysis of the Great Moderation," Regional Science and Urban Economics, Elsevier, vol. 38(6), pages 578-589, November.
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    Cited by:

    1. Faberman, R. Jason, 2017. "Job flows, jobless recoveries, and the Great Moderation," Journal of Economic Dynamics and Control, Elsevier, vol. 76(C), pages 152-170.
    2. Barnett, Alina & Mumtaz, Haroon & Theodoridis, Konstantinos, 2014. "Forecasting UK GDP growth and inflation under structural change. A comparison of models with time-varying parameters," International Journal of Forecasting, Elsevier, vol. 30(1), pages 129-143.
    3. Kevin x.d. Huang & Jie Chen & Zhe Li & Jianfei Sun, 2014. "Financial Conditions and Slow Recoveries," Vanderbilt University Department of Economics Working Papers 14-00004, Vanderbilt University Department of Economics.

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