The Rising Strength of Management, High Unemployment and Slow Growth: Revisiting Okunâ€™s Law
Why is economic growth so slow and why are we having jobless recoveries? I address these questions here by revisiting Okunâ€™s Law, focusing not just on its cyclical component but also upon its implied estimates of trend growth. Some observers argue that the rising strength of management (falling strength of labor) since the 1980s has led to a more volatile labor market and therefore to the decay of Okunâ€™s Law. Using cross-state data since 1964 I examine whether Okunâ€™s Law has changed in response to the decline of unionism. I find that the cyclical component of Okunâ€™s Law does not need revision and that the trend growth component has declined moderately.
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