A SEARCH AND MATCHING APPROACH TO LABOR MARKETS DID THE NATURAL - - PowerPoint PPT Presentation

A SEARCH AND MATCHING APPROACH TO LABOR MARKETS

DID THE NATURAL RATE OF UNEMPLOYMENT RISE?

JOURNAL OF ECONOMIC PERSPECTIVES, 26(3), SUMMER 2012, 3-26 UPDATED RESULTS THAT COVER DATA THROUGH AUGUST 7TH 2012.

Mary Daly (FRBSF), Bart Hobijn (FRBSF, VU Amsterdam, and TI) , Ayşegül Şahin (FRBNY) , and Rob Valletta (FRBSF)

Disclaimer: The views expressed in this presentation are those of the authors and do not necessarily reflect those of the Federal Reserve Bank of San Francisco, Federal Reserve Bank of New York, or the Federal Reserve System as a whole.

Daly, Hobijn, Sahin, Valletta 1 Updated results 08/07/2012

U.S Beveridge Curve

Daly, Hobijn, Sahin, Valletta Updated results 08/07/2012 2

Jun-12

1% 2% 3% 4% 5% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11%

Source: JOLTS, CPS, and authors' calculations

Monthly observations; pre-2007-recession fit

Actual and fitted Beveridge Curve

Unemployment rate Job openings rate before 2007 recession since 2007 recession Fitted

Gap: 2.8%

Estimate of shifted BC since 2010

Daly, Hobijn, Sahin, Valletta Updated results 08/07/2012 3

Jun-12

1% 2% 3% 4% 5% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11%

Source: JOLTS, CPS, and authors' calculations. New Beveridge curve estimate based on shift in match efficiency over last 12 months.

Pre-2007-recession fit; Shift based on last 12-months

Fitted and "New" Beveridge Curve

Unemployment rate Job openings rate before 2007 recession since 2007 recession Fitted "New" BC

Historical Shifts in the Beveridge Curve

Daly, Hobijn, Sahin, Valletta Updated results 08/07/2012 4

1 2 3 4 5 6 2 4 6 8 10 12

Source: BLS, Conference Board, Barnichon (2010) and authors' calculations

Seasonally adjusted; quarterly observations; merged HWI and JOLTS

Historical Beveridge Curve

Unemployment rate Vacancy rate 1950s 1960s 1970s 1980s 1990s 2000s

Estimated Long-Run JCC

Daly, Hobijn, Sahin, Valletta Updated results 08/07/2012 5

1 1.5 2 2.5 3 3.5 4 4.5 5 5.5 6 4.5 5.0 5.5 6.0 6.5

Source: JOLTS, BLS, CBO, and authors' calculations

Seasonally adjusted; quarterly data; regression based on pre-2008 data

Historical Job Creation Curve

Natural rate of unemployment Vacancy rate Before 2007 recession Since 2007 recession

Regression: Vacancy rate = -2.7 + 1.2 * Natural rate of unemployment, R-squared = 0.34

Estimated JCC and BC

Daly, Hobijn, Sahin, Valletta Updated results 08/07/2012 6 Jun 12

1% 2% 3% 4% 5% 2% 3% 4% 5% 6% 7% 8% 9% 10%

Vacancy rate

Source: JOLTS, CPS, CBO, and authors' calculations

Unemployment rate

Fitted Shifted BC Empirical JC curve

5.6% 7.1%

Okun’s Law

Daly, Hobijn, Sahin, Valletta Updated results 08/07/2012 7

2012Q2

• 4
• 3
• 2
• 1

1 2 3 4 5 6

• 10
• 8
• 6
• 4
• 2

2 4 6

Source: Bureau of Economic Analysis, Bureau of Labor Statistics, Congressional Budget Office, Authors' calculations

Based on CBO potential output and NAIRU estimates (1949Q1-now)

Okun's Law

Output gap Unemployment gap 2007 Recession and after

Industry Mismatch

Daly, Hobijn, Sahin, Valletta Updated results 08/07/2012 8

1 2 3 4 5 6 7 1970 1975 1980 1985 1990 1995 2000 2005 2010

Source: Bureau of Labor Statistics and FRBSF

Weighted standard deviation of 12-month employment growth (through July 2012)

Dispersion Across 15 Major Industries

Percent