Hysteresis in Labor Markets? Evidence from Professional Long-Term Forecasts
IMF Working Papers, May 23, 2019
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- Hysteresis in Labor Markets? Evidence from Professional Long-Term Forecasts
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Bibliographic details
- Authors: John C Bluedorn, Daniel Leigh
- Published: May 23, 2019
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781498315692.001
Research question and approach
- Objective: Explore the long-term impact of economic booms on labor market outcomes.
- Novel approach: Analysis based on revisions to professional forecasts.
- Sample and period: revisions over the past 30 years for 34 advanced economies.
Key findings
- When employment rises unexpectedly:
- Forecasters typically raise their long-term forecasts of employment by more than one-for-one.
- Forecasters also expect a strong rise in labor force participation.
- These responses suggest more persistent effects than is traditionally assumed.
- Economic booms associated with changes in aggregate demand (characterized by inflation rising and unemployment falling unexpectedly):
- Come with persistent long-term effects on expected employment and labor force participation.
- Suggest positive hysteresis in labor markets.
- Forecast evaluation:
- Tests indicate that forecasters are, on average, unbiased in their assessment of these positive, persistent effects.
Subject coverage and keywords (as used in the source)
- Subjects: Employment, Labor, Labor force, Labor force participation, Labor markets, Unemployment rate.
- Keywords: business cycles; current-period employment; Employment; employment revision; Global; Hysteresis; Labor force; Labor force participation; labor market; labor market fluctuation; labor market outcome; labor market variable; Labor markets; labor-market persistence; monetary policy; Unemployment rate; WP.
IMF Working Paper No. 2019/114 by John C Bluedorn and Daniel Leigh (May 23, 2019).
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- Working Paper