Jobless Recoveries: Stagnation or Structural Change?

25 Pages Posted: 11 Jun 2016

See all articles by John D. Burger

John D. Burger

Loyola University Maryland - Department of Economics

Jeremy S. Schwartz

Loyola University Maryland - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: June 9, 2016

Abstract

Within the existing literature on jobless recoveries a bit of a puzzle is emerging. On the one hand there is evidence of dynamic structural change including off-shoring/globalization and skill-biased technological advances. Other studies emphasize a less dynamic economy with slower growth, reduced labor market fluidity, a decline in startup activity, and even secular stagnation. This study exploits variation among US states to assess the degree that economic stagnation and/or important structural changes in the economy contribute to the recent phenomenon of jobless recoveries. We find empirical evidence to support both the stagnation and structural change theories of jobless recoveries. On the stagnation side, we find evidence that weak macroeconomic conditions are significant predictors of jobless recoveries. But even after controlling for the vigor of an economic recovery at the state and national level, we find strong evidence that links jobless recoveries to job polarization. Our results therefore suggest that structural change in labor demand is likely causing jobs in the middle of the skill distribution to be disproportionately slashed during recessions, and to the extent that these jobs are being automated, firms have less of a need to rehire during the expansion yielding a jobless recovery.

Keywords: Business Cycles, Recessions, Jobless Recoveries, Job Polarization, Unemployment

JEL Classification: E32, E24

Suggested Citation

Burger, John D. and Schwartz, Jeremy S., Jobless Recoveries: Stagnation or Structural Change? (June 9, 2016). Available at SSRN: https://ssrn.com/abstract=2793153 or http://dx.doi.org/10.2139/ssrn.2793153

John D. Burger (Contact Author)

Loyola University Maryland - Department of Economics ( email )

4501 N. Charles St
Baltimore, MD 21210
United States
410-617-5831 (Phone)
410-617-2118 (Fax)

Jeremy S. Schwartz

Loyola University Maryland - Department of Economics ( email )

4501 N. Charles St.
Baltimore, MD 21210-2699
United States

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