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Sluggish US employment recovery after the Great Recession: Cyclical or structural factors?

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  • Lucchetta, Marcella
  • Paradiso, Antonio

Abstract

This paper aims at investigating the causes of the observed departure of employment path from the GDP movements occurred in US in the late of 2008 onwards. Starting from a production function approach, and assuming that the TFP growth is explained by variables linked to the business cycle, we are able to formulate an extended version of Okun’s law based on cyclical factors. Out-of-sample forecasting for the period 2008 onward shows that predicted US employment is on average 1.7% above the observed one, meaning that this gap cannot be attributed to identified cyclical factors.

Suggested Citation

  • Lucchetta, Marcella & Paradiso, Antonio, 2014. "Sluggish US employment recovery after the Great Recession: Cyclical or structural factors?," Economics Letters, Elsevier, vol. 123(2), pages 109-112.
  • Handle: RePEc:eee:ecolet:v:123:y:2014:i:2:p:109-112
    DOI: 10.1016/j.econlet.2014.01.032
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    References listed on IDEAS

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    2. Michael W. L. Elsby & Bart Hobijn & Aysegul Sahin, 2010. "The Labor Market in the Great Recession," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 41(1 (Spring), pages 1-69.
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    5. Montalvo, Jose G., 1995. "Comparing cointegrating regression estimators: Some additional Monte Carlo results," Economics Letters, Elsevier, vol. 48(3-4), pages 229-234, June.
    6. Francisco L. Rivera-Batiz & Luis A. Rivera-Batiz, 2018. "International Trade with Endogenous Technological Change," World Scientific Book Chapters,in: International Trade, Capital Flows and Economic Development, chapter 2, pages 33-70 World Scientific Publishing Co. Pte. Ltd..
    7. Edwards, Sebastian, 1998. "Openness, Productivity and Growth: What Do We Really Know?," Economic Journal, Royal Economic Society, vol. 108(447), pages 383-398, March.
    8. Mary C. Daly & Bart Hobijn, 2010. "Okun’s law and the unemployment surprise of 2009," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue mar8.
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    Citations

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    Cited by:

    1. repec:eee:ecolet:v:174:y:2019:i:c:p:26-30 is not listed on IDEAS
    2. Klinger, Sabine & Weber, Enzo, 2016. "Detecting unemployment hysteresis: A simultaneous unobserved components model with Markov switching," Economics Letters, Elsevier, vol. 144(C), pages 115-118.
    3. Pitorac Ruxandra, 2015. "The Specifics Of Okun’S Law In The Romanian Economy Between 2007 And 2013," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 1, pages 50-53, February.
    4. Michael Donadelli & Vahid Mojtahed & Antonio Paradiso, 2015. "Technological Progress, Investment Frictions and Business Cycle: New Insights from a Neoclassical Growth Model," Working Papers LuissLab 15119, Dipartimento di Economia e Finanza, LUISS Guido Carli.
    5. Klinger, Sabine & Weber, Enzo, 2014. "On GDP-employment decoupling in Germany," IAB Discussion Paper 201421, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    6. Luz A. Flórez & Karen L. Pulido-Mahecha & Mario A. Ramos-Veloza, 2018. "Okun´s law in Colombia: a non-linear cointegration," Borradores de Economia 1039, Banco de la Republica de Colombia.
    7. Klinger, Sabine & Weber, Enzo, 2015. "GDP-Employment Decoupling and the Productivity Puzzle in Germany," University of Regensburg Working Papers in Business, Economics and Management Information Systems 485, University of Regensburg, Department of Economics.

    More about this item

    Keywords

    Okun’s law; Employment recovery; Cointegration; Structural and cyclical factors;

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • C40 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - General

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