Search Results
Journal Article
What constitutes substantial employment gains in today’s labor market?
The Federal Open Market Committee (FOMC) has tied its asset purchases to a ?substantial improvement? in labor market conditions. While we don?t speculate on what the FOMC means by substantial improvement, we do explore the level of monthly job gains that would gradually deliver the underlying trend unemployment rate within a reasonable timeframe, under several plausible scenarios. We find that the path of monthly job gains, which is highly dependent on a few key parameters, is likely to be smaller than the path associated with previous recoveries.
Working Paper
The Unintended Consequences of Employer Credit Check Bans on Labor and Credit Markets
Since the Great Recession, 11 states have restricted employers? access to the credit reports of job applicants. We document that county-level vacancies decline between 9.5 percent and 12.4 percent after states enact these laws. Vacancies decline significantly in affected occupations but remain constant in those that are exempt, and the decline is larger in counties with many subprime residents. Furthermore, subprime borrowers fall behind on more debt payments and reduce credit inquiries postban. The evidence suggests that, counter to their intent, employer credit check bans disrupt labor and ...
Journal Article
The State of States’ Unemployment in the Fourth District
Unemployment rates vary across individual US states at any point in time and respond to business-cycle fluctuations differently. Evaluating what constitutes a ?normal? level for the unemployment rate at the state level is not easy, but it is an important issue for policymakers. We introduce a framework that enables us to calculate the normal unemployment rate for each of the four states in the Fourth District and compare that rate to the national normal rate. We conclude that these states and the District as a whole have very little labor market slack left from the Great Recession.
Working Paper
Firms, Skills, and Wage Inequality
We present a model with search frictions and heterogeneous agents that allows us to decompose the overall increase in US wage inequality in the last 30 years into its within- and between-firm and skill components. We calibrate the model to evaluate how much of the overall rise in wage inequality and its components is explained by different channels. Output distribution per firm-skill pair more than accounts for the observed increase over this period. Parametric identification implies that the worker-specific component is responsible for 85 percent of this, compared to 15 percent that is ...
Working Paper
Diagnosing labor market search models: a multiple-shock approach
This paper constructs a multiple-shock version of the Mortensen-Pissarides labor market search model to investigate the basic model?s well-known tendency to under predict the volatility of key labor market variables. Data on U.S. job finding and job separation probabilities are used to help estimate the parameters of a three-dimensional shock process comprising labor productivity, job separation, and matching or ?allocative? efficiency. The authors show that the Mortensen-Pissarides labor market search model requires significantly procyclical and volatile job separations to simultaneously ...
Journal Article
An unstable Okun’s Law, not the best rule of thumb
Okun?s law is a statistical relationship between unemployment and GDP that is widely used as a rule of thumb for assessing the unemployment rate?why it might be at a certain level or where it might be headed, for example. Unfortunately, the Okun?s law relationship is not stable over time, which makes it potentially misleading as a rule of thumb.
Journal Article
The Unemployment Cost of COVID-19: How High and How Long?
We use flows into and out of unemployment to estimate the unemployment rate over the next year. This approach produces less stark projections for the unemployment rate over the course of the next year than some of the more alarming projections that have been reported. Using our approach and assuming that the severest social-distancing measures will be lifted in June, we estimate that the unemployment rate will peak in May at about 16 percent but gradually decline thereafter and end the year at 7.5 percent.
Journal Article
Challenges with Estimating U Star in Real Time
Although the concept of the natural rate of employment, NAIRU, or ?U star? is used to measure the amount of slack in the labor market, it is an unobservable quantity that must be estimated using data currently available. This Commentary investigates the degree to which our estimates of U star at various points in the current business cycle have changed as real-time data have been revised and as more data points have accumulated. I find that the availability of additional data has contributed to a significant change in our estimates of U star at earlier points in the business cycle, a result ...
Working Paper
Lessons for Forecasting Unemployment in the U.S.: Use Flow Rates, Mind the Trend
This paper evaluates the ability of autoregressive models, professional forecasters, and models that leverage unemployment flows to forecast the unemployment rate. We pay particular attention to flows-based approaches?the more reduced form approach of Barnichon and Nekarda (2012) and the more structural method in Tasci (2012)?to generalize whether data on unemployment flows is useful in forecasting the unemployment rate. We find that any approach that leverages unemployment inflow and outflow rates performs well in the near term. Over longer forecast horizons, Tasci (2012) appears to be a ...
Journal Article
The Great Resignation and the Paycheck Protection Program
A prominent feature of the US labor markets during the recovery from the COVID-19 recession was a high level of worker separations in the form of quits. This phenomenon, sometimes referred to as the Great Resignation, cannot be fully explained by the strength of the recovery. We show that firms that employ fewer than 250 individuals played a disproportionately larger role in generating excess quits during this episode. We further argue that the availability of Paycheck Protection Program funds might have prevented some “usual” reallocation from happening early on and thus subsequently ...