What Explains the Recent Jobless Recoveries?
46 Pages Posted: 24 Jan 2014 Last revised: 5 Jun 2015
Date Written: June 4, 2015
This paper considers a correlated unobserved components (UC) model for output, employment, and hours in order to disentangle the causes for the last three jobless recoveries. The composition of the structural shocks during recessions and the periods immediately following recessions has changed, as have the responses of employment and hours to those shocks. The recessions before 1984 were followed by recoveries driven by positive permanent shocks to output, whereas the post-1984 recessions were followed by weak recoveries in demand. Employment is more sensitive to demand shocks post-1984, leading to weak recoveries in employment. In addition, hours and employment were complements before 1984, but are treated as substitutes after 1984. Much of the initial decrease in demand is now absorbed on the intensive margin
Keywords: Business cycles, Macroeconometrics, Labor Markets, Jobless Recoveries
JEL Classification: E32, E24, C32
Suggested Citation: Suggested Citation