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Cyclical signals from the labor market

Author

Listed:
  • Tino Berger
  • Paul David Boll
  • James Morley
  • Benjamin Wong

Abstract

We consider which labor market variables are the most informative for estimating and now-casting the U.S. output gap using a multivariate trend-cycle decomposition. Although the unemployment rate clearly contains important cyclical information, it also appears to reflect more persistent movements related to labor force participation that could distort inferences about the output gap. Instead, we show that the alternative U-2 unemployment rate (job losers as a percentage of the labor force) provides a more purely cyclical indicator of labor market conditions. To a lesser extent, but consistent with a link of the output gap to real labor costs in a New Keynesian setting, we also find that average hourly earnings are informative about the output gap.

Suggested Citation

  • Tino Berger & Paul David Boll & James Morley & Benjamin Wong, 2021. "Cyclical signals from the labor market," CAMA Working Papers 2021-91, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:een:camaaa:2021-91
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    File URL: https://cama.crawford.anu.edu.au/sites/default/files/publication/cama_crawford_anu_edu_au/2021-10/91_2021_berger_boll_morley_wong0.pdf
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    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Annual Review 2021
      by noreply@blogger.com (David Stern) in Stochastic Trend on 2021-12-30 06:11:00

    Citations

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    Cited by:

    1. Philippe Goulet Coulombe, 2022. "A Neural Phillips Curve and a Deep Output Gap," Working Papers 22-01, Chair in macroeconomics and forecasting, University of Quebec in Montreal's School of Management.
    2. Tino Berger & Christian Ochsner, 2022. "Tracking the German Business Cycle," MAGKS Papers on Economics 202212, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    3. Philippe Goulet Coulombe, 2022. "A Neural Phillips Curve and a Deep Output Gap," Papers 2202.04146, arXiv.org.

    More about this item

    Keywords

    Nowcasting; output gap; Covid-19; U-2 unemployment rate; average hourly earnings;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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