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Post-recession US employment through the lens of a non-linear Okun’s law

Menzie Chinn (), Laurent Ferrara () and Valérie Mignon ()

No 2013-12, EconomiX Working Papers from University of Paris Nanterre, EconomiX

Abstract: This paper aims at investigating the relationship between employment and GDP in the United States. We disentangle trend and cyclical employment components by estimating a non-linear Okun’s law based on a smooth transition error-correction model that simultaneously accounts for long-term relationships between growth and employment and short-run instability over the business cycle. Our findings based on out-of-sample conditional forecasts show that, since the exit of the 2008-09 recession, US employment is on average around 1% below the level implied by the long run output-employment relationship, meaning that about 1.2 million of the trend employment loss cannot be attributed to the identified cyclical factors.

Keywords: Okun’s law; trend employment; non-linear modeling (search for similar items in EconPapers)
JEL-codes: E24 E32 C22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-for, nep-lab and nep-mac
Date: 2013
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Working Paper: Post-Recession US Employment through the Lens of a Non-Linear Okun's Law (2013) Downloads
Working Paper: Post-recession US Employment through the Lens of a Non-linear Okun's law (2013) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:drm:wpaper:2013-12

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