Measuring Labor Market Slack: Are the Long-Term Unemployed Different?
Robert C. Dent,
Samuel Kapon,
Fatih Karahan,
Benjamin Pugsley and
Aysegul Sahin
No 20141117, Liberty Street Economics from Federal Reserve Bank of New York
Abstract:
There has been some debate in the Liberty Street Economics blog and in other outlets, such as Krueger, Cramer, and Cho (2014) and Gordon(2013), about whether the short-term unemployment rate is a better measure of slack than the overall unemployment rate. As the chart below shows, the two measures are sending different signals, with the short-term unemployment rate back to its pre-recession level while the overall rate is still elevated because of a high long-term unemployment rate. One can argue that the unemployment rate is exaggerating the extent of underutilization in the labor market, based on the premise that the long-term unemployed are, in practice, out of the labor force and likely to exert little pressure on earnings. If this is indeed the case, inflationary pressures might start building up sooner than suggested by the overall unemployment rate. In a three-part series, we study the available evidence on the long-term unemployed and argue against this premise. The long-term unemployed should not be excluded from measures of labor market slack.
Keywords: labor market slack; long-term unemployment; wage pressure (search for similar items in EconPapers)
JEL-codes: E2 (search for similar items in EconPapers)
Date: 2014-11-17
New Economics Papers: this item is included in nep-mac
References: Add references at CitEc
Citations:
Downloads: (external link)
https://libertystreeteconomics.newyorkfed.org/2014 ... loyed-different.html Full text (text/html)
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:fip:fednls:86992
Ordering information: This working paper can be ordered from
pipubs@ny.frb.org
Access Statistics for this paper
More papers in Liberty Street Economics from Federal Reserve Bank of New York Contact information at EDIRC.
Bibliographic data for series maintained by Gabriella Bucciarelli (gabriella.bucciarelli@ny.frb.org).