Firms’ deleveraging and the persistence of unemployment

Tommaso Monacelli, Vincenzo Quadrini, Antonella Trigari 18 October 2011

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The recent financial turmoil has been associated with a depressed state of the labour market. The unemployment rate in the US has risen from 5.5% to more than 10% and continues to remain close to 9% three years after the beginning of the recession (see Figure 1).

Figure 1. Unemployment rate

Note: percent, civilian unemployment rate. Source: BLS

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Topics:  Labour markets Macroeconomic policy

Tags:  US, unemployment, Great Recession

Market psychology, high unemployment and rational bubbles

Roger E. A. Farmer 18 August 2011

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According to a popular narrative (e.g. Shiller 2008), the Great Recession was caused by a bubble in the housing market. When the bubble burst, households were left with mortgages that exceeded the values of their houses. When they stopped spending, the resulting fall in consumer demand triggered an increase in unemployment. The drop in housing wealth was accompanied by a stock market crash, precipitated by the failure of Lehman Brothers in the fall of 2007.

Although this narrative fits the facts, it poses two major difficulties for conventional microeconomic theory.

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Topics:  Frontiers of economic research

Tags:  unemployment, psychology, bubbles, rational expectations

The allocation of time over the business cycle

Erik Hurst, Loukas Karabarbounis, Mark Aguiar 17 August 2011

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After years of steady growth, the global economy has turned and so too has the interest in unemployment (see recent examples on this site Smith 2011 and Cingano and Rosolia 2011). The rising levels of unemployment around the world bring up some key questions:

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Topics:  Labour markets

Tags:  US, unemployment, recession, jobs, time management

The ins and outs of UK unemployment

Jennifer Smith 18 July 2011

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The labour market is in a continual state of flux. Workers are hired, fired, joining the labour force and leaving the labour force. The balance of these flows determines the unemployment rate. In the US, research suggests that job finding is most influential in driving unemployment changes (Shimer 2007), although separation from jobs also plays a role at the start of recessions (Barnichon 2009, Elsby Michaels and Solon 2009; Fujita and Ramey 2009). But the US labour market stands out as different from other countries in its high level of turnover (Elsby et al. 2008).

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Topics:  Labour markets

Tags:  unemployment, job search, UK, employment protection

Where are the jobs? Out there, somewhere. Perhaps.

Alfonso Rosolia, Federico Cingano 17 July 2011

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The global crisis hit jobs hard. According to the OECD, between 2007 and 2010 the number of employed people fell by almost 5 million throughout OECD countries and the number of job seekers rose by over 16 million. It is now about two years since the trough of the recession, and unemployment rates remain at historical highs in many advanced economies despite signs of recovery in economic activity and labour demand.

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Topics:  Labour markets

Tags:  unemployment, jobs, networks

Egypt’s demographic pressure – Where and how to create jobs?

Marga Peeters 02 June 2011

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Demographic developments place Egypt among the group of countries around the globe with the highest labour-supply growth for many years to come. The Egyptian economy can reap a demographic dividend from this human capital potential if the new entrants find a job (see also Noland and Pack 2008).

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Topics:  Development Labour markets Politics and economics

Tags:  unemployment, Arab uprising, Egypt

Coping with crises: Policies to protect employment and earnings

Pierella Paci, Ana Revenga, Bob Rijkers 19 April 2011

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“There cannot be a crisis next week. My schedule is already full.” – Henry A Kissinger

Crises are difficult to predict, yet their recurrence is an empirical regularity in both developing and developed countries. Nevertheless, as painfully highlighted by the ad hoc and reactive nature of the policy responses to the financial crisis of 2009 and 2010, many countries are ill-prepared to manage these recurrent shocks.

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Topics:  Global crisis Labour markets Macroeconomic policy

Tags:  unemployment, financial crises

The roots of the German miracle

Hermann Gartner, Christian Merkl 09 March 2011

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While the US labour market has seen a dramatic loss in jobs in the Great Recession, the German labour market has seemed to be unaffected – the number of employed workers has remained stable. This is all the more surprising as German GDP dropped more than in the US in 2009 (-4.7% vs. -2.7%). Some economists (e.g. Möller 2010) have correctly pointed out that German firms were hoarding labour and thereby absorbing part of the output shock.

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Topics:  Europe's nations and regions Labour markets

Tags:  Germany, unemployment, Labour-market reform

Deviations from the Taylor rule and the dual mandate

Nicolas Groshenny 02 February 2011

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According to its official mandate, the Federal Reserve sets the federal funds rate to achieve a dual goal of price stability and maximum sustainable employment. Since the global crisis erupted, debate has been raging over the Federal Reserve's conduct of monetary policy over the period 2002-2006. For example, Taylor (2007) criticises the Federal Reserve for departing from its usual conduct of monetary policy after 2001 and suggests it kept the federal funds rate too low between 2002 and 2006 (see Figure 1).

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Topics:  Global crisis Monetary policy

Tags:  inflation, unemployment, Taylor rules

Is short-time work a good method to keep unemployment down?

Pierre Cahuc, Stéphane Carcillo 01 February 2011

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Short-time compensation (or short-time work) aims at reducing lay-offs by allowing employers to temporarily reduce hours worked while compensating workers for the induced loss of income. At present, short-time work schemes are widespread among OECD countries, having grown in popularity during the Great Recession. As shown by Figure 1, they are now used in 25 of the 33 OECD countries.1

Figure 1. Short-time work take-up rates in the OECD countries (as a percentage of employees) 

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Topics:  Labour markets

Tags:  unemployment, OECD, Short-term work

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