In a recent paper, Robert Hall makes two interesting assertions about employment over the business cycle. First, the "Great Moderation"--the reduction in U.S. macroeconomic volatility since 1984--is only a feature of output, not employment. Second, employment falls during a recession not because of increased job losses, but because new jobs are harder to find. Both of these claims were news to me so I decided to dig into the data myself.
Regarding the first assertion, Hall provides a figure (Figure 1 in the paper) that shows the percentage deviation of employment from trend does not noticeably change since 1948. It is not clear how he constructed the figure, but here is a graph from the Fred database at the St. Louis Fed that shows the monthly percentage change in employment over the same period:
Regarding the first assertion, Hall provides a figure (Figure 1 in the paper) that shows the percentage deviation of employment from trend does not noticeably change since 1948. It is not clear how he constructed the figure, but here is a graph from the Fred database at the St. Louis Fed that shows the monthly percentage change in employment over the same period:
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Visual inspection of this figure indicates that employment volatility has diminished since 1984. Hall, in fact, does concede there does appear to be some reduction using this approach, but he goes on to claim that it has not declined as much as with output. Here is what I found looking at the standard deviation of the quarterly growth rate for both real GDP and employment (data from Fred database again):
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Regarding the second assertion, Hall provides a figure (Figure 2) that shows percent of workers laid off since 2000 has been relatively stable. This table was constructed using data from the BLS's Job Opportunity and Labor Turnover Survey (JOLTS). Digging into this data I was able to get numbers on layoffs and other separations, as well as new hires. I have graphed the data below:
If these patterns hold up going forward, then any good macro theory should be able to explain them. This was the whole point of Hall's paper.
Maybe seasonal stuff and trend change is what's causing your inability to replicate claim #1. Why not Hodrick-Prescott it?
ReplyDeleteIt certainly seems that labor volatility has decreased along
ReplyDeletewith output volatility.
And wouldn't the basic macro model predict that? If the shocks to productivity that drive the economy moderate, then output and employment volatility should be lower.