The United States Labor Market: Status Quo or a New Normal?

53 Pages Posted: 22 Jan 2013

See all articles by Edward P. Lazear

Edward P. Lazear

Stanford Graduate School of Business; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

James Spletzer

United States Department of Labor

Multiple version iconThere are 2 versions of this paper

Date Written: September 2012

Abstract

The recession of 2007-09 witnessed high rates of unemployment that have been slow to recede. This has led many to conclude that structural changes have occurred in the labor market and that the economy will not return to the low rates of unemployment that prevailed in the recent past. Is this true? The question is important because central banks may be able to reduce unemployment that is cyclic in nature, but not that which is structural. An analysis of labor market data suggests that there are no structural changes that can explain movements in unemployment rates over recent years. Neither industrial nor demographic shifts nor a mismatch of skills with job vacancies is behind the increased rates of unemployment. Although mismatch increased during the recession, it retreated at the same rate. The patterns observed are consistent with unemployment being caused by cyclic phenomena that are more pronounced during the current recession than in prior recessions.

Suggested Citation

Lazear, Edward P. and Spletzer, James, The United States Labor Market: Status Quo or a New Normal? (September 2012). US Census Bureau Center for Economic Studies Paper No. CES-WP-12-28, Available at SSRN: https://ssrn.com/abstract=2205204 or http://dx.doi.org/10.2139/ssrn.2205204

Edward P. Lazear (Contact Author)

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James Spletzer

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