Hysteresis in Labor Markets? Evidence from Professional Long-Term Forecasts

May 23, 2019

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Format: Chicago

John C Bluedorn, and Daniel Leigh. Hysteresis in Labor Markets? Evidence from Professional Long-Term Forecasts, (USA: International Monetary Fund, 2019) accessed September 19, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

We explore the long-term impact of economic booms on labor market outcomes using a novel approach based on revisions to professional forecasts over the past 30 years for 34 advanced economies. We find that when employment rises unexpectedly, forecasters typically raise their long-term forecasts of employment by more than one-for-one and also expect a strong rise in labor force participation, suggesting more persistent effects than is traditionally assumed. Economic booms associated with changes in aggregate demand, when inflation is rising and unemployment falling unexpectedly, also come with persistent long-term effects on expected employment and labor force participation, suggesting positive hysteresis. Our forecast evaluation tests indicate that forecasters are, on average, unbiased in their assessment of these positive, persistent effects.

Subject: 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

Publication Details

Pages:

22
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2019/114
Stock No:

WPIEA2019114
ISBN:

9781498315692
ISSN:

1018-5941

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