Working Paper: NBER ID: w15979
Authors: Michael W. Elsby; Bart Hobijn; Aysegul Sahin
Abstract: From the perspective of a wide range of labor market outcomes, the recession that began in 2007 represents the deepest downturn in the postwar era. Early on, the nature of labor market adjustment displayed a notable resemblance to that observed in past severe downturns. During the latter half of 2009, however, the path of adjustment exhibited important departures from that seen during and after prior deep recessions. Recent data point to two warning signs going forward. First, the record rise in long-term unemployment may yield a persistent residue of long-term unemployed workers with weak search effectiveness. Second, conventional estimates suggest that the extension of Emergency Unemployment Compensation may have led to a modest increase in unemployment. Despite these forces, we conclude that the problems facing the U.S. labor market are unlikely to be as severe as the European unemployment problem of the 1980s.
Keywords: Labor Market; Great Recession; Unemployment; Emergency Unemployment Compensation
JEL Codes: E24; E32; J6
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| 2007 recession (F44) | unemployment levels (J64) |
| higher layoff rates (J63) | increase in unemployment inflows (J68) |
| emergency unemployment compensation (J65) | increased unemployment duration (J64) |
| duration of unemployment (J64) | job search efficiency (J68) |
| extension of unemployment compensation (J65) | increased unemployment (J65) |