The Labor Market in the Great Recession: An Update

Michael Elsby, Bart Hobijn, Aysegul Sahin and Robert Valletta

No 11-173/3, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: Since the end of the Great Recession in mid-2009, the unemployment rate has recovered slowly, falling by only one percentage point from its peak. We find that the lackluster labor market recovery can be traced in large part to weakness in aggregate demand; only a small part seems attributable to increases in labor market frictions. This continued labor market weakness has led to the highest level of long-term unemployment in the U.S. in the postwar period, and a blurring of the distinction between unemployment and nonparticipation. We show that flows from nonparticipation to unemployment are important for understanding the recent evolution of the duration distribution of unemployment. Simulations that account for these flows suggest that the U.S. labor market is unlikely to be subject to high levels of structural long-term unemployment after aggregate demand recovers.

Keywords: Labor market dynamics; long-term unemployment; unemployment duration (search for similar items in EconPapers)
JEL-codes: E24 J2 (search for similar items in EconPapers)
Date: 2011-12-08
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Citations: View citations in EconPapers (45)

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Working Paper: The labor market in the Great Recession: an update (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20110173

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