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Using cyclical regimes of output growth to predict jobless recoveries

  • Michael J. Dueker

Gaps between output and employment growth are often attributed to transitional phases by which the economy adjusts to shifts in the rate of trend productivity growth. Nevertheless, cyclical factors can also drive a wedge between output and employment growth. This article shows that one measure of cyclical dynamics-the expected output loss associated with a recession-helps predict the gap between output and employment growth in the coming four quarters. This measure of the output loss associated with a recession can take unexpected twists and turns as the recovery unfolds. The empirical results in this paper support the proposition that a weaker-than-expected rebound in the economy can partially mute employment growth for a time relative to output growth.

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Article provided by Federal Reserve Bank of St. Louis in its journal Review.

Volume (Year): (2006)
Issue (Month): Mar ()
Pages: 145-154

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Handle: RePEc:fip:fedlrv:y:2006:i:mar:p:145-154:n:v.88no.2
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  1. Mark A. Wynne & Nathan S. Balke, 1992. "Are deep recessions followed by strong recoveries?," Research Paper 9201, Federal Reserve Bank of Dallas.
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  9. Daniel Aaronson & Ellen R. Rissman & Daniel G. Sullivan, 2004. "Assessing the jobless recovery," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q II, pages 2-21.
  10. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-84, March.
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