A Look at Jobless Recoveries in G7 Countries

Abstract

We study changes in the plucking behavior of employment growth, as well as changes in its relationship with the output cycle in the G7 countries. Using both revised and real-time data, we consider several popular measures of the output cycle. For most countries, we see significant evidence in favor of structural changes in the response coefficients of employment growth to its own gap, suggesting much slower recoveries in labor markets, consistent with the jobless recoveries hypothesis. However, we also find evidence in favor of heterogeneity across countries, both in the responses of employment to employment gaps and in the responses of employment to the output cycle.

Keywords: nonlinear business cycles, employment, G7, joblessness, plucking

JEL Classification: E24, E32