Institutional Affiliation: University of Paris Ouest
|Post-recession US Employment through the Lens of a Non-linear Okun's law|
with , : w19047
This paper aims at investigating the relationship between employment and GDP in the United States. We disentangle trend and cyclical employment components by estimating a non-linear Okun's law based on a smooth transition error-correction model that simultaneously accounts for long-term relationships between growth and employment and short-run instability over the business cycle. Our findings based on out-of-sample conditional forecasts show that, since the exit of the 2008-09 recession, US employment is on average around 1% below the level implied by the long run output-employment relationship, meaning that about 1.2 million of the trend employment loss cannot be attributed to the identified cyclical factors.
Published: Journal of Macroeconomics Volume 42, December 2014, Pages 118–129 Cover image Explaining US employment growth after the great recession: The role of output–employment non-linearities Menzie Chinna, , , Laurent Ferrarab, , Valérie Mignonc,