A SEARCH AND MATCHING APPROACH TO LABOR MARKETS DID THE NATURAL - PowerPoint PPT Presentation

Mary Daly (FRBSF) , Bart Hobijn (FRBSF, VU Amsterdam, and TI) , Ayşegül Şahin (FRBNY) , and Rob Valletta ( FRBSF) A SEARCH AND MATCHING APPROACH TO LABOR MARKETS DID THE NATURAL RATE OF UNEMPLOYMENT RISE? JOURNAL OF ECONOMIC PERSPECTIVES, 26(3), SUMMER 2012, 3-26 UPDATED RESULTS THAT COVER DATA THROUGH AUGUST 7 TH 2012. Disclaimer: The views expressed in this presentation are those of the authors and do not necessarily reflect those of the Federal Reserve Bank of San Francisco, Federal Reserve Bank of New York, or the Federal Reserve System as a whole. Daly, Hobijn, Sahin, Valletta Updated results 08/07/2012 1

U.S Beveridge Curve Actual and fitted Beveridge Curve Monthly observations; pre-2007-recession fit Job openings rate 5% Fitted 4% before 2007 recession 3% Gap: 2.8% Jun-12 2% since 2007 recession 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% Unemployment rate Source: JOLTS, CPS, and authors' calculations Daly, Hobijn, Sahin, Valletta Updated results 08/07/2012 2

Estimate of shifted BC since 2010 Fitted and "New" Beveridge Curve Pre-2007-recession fit; Shift based on last 12-months Job openings rate 5% "New" BC Fitted 4% before 3% 2007 recession Jun-12 2% since 2007 recession 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% Unemployment rate Source: JOLTS, CPS, and authors' calculations. New Beveridge curve estimate based on shift in match efficiency over last 12 months. Daly, Hobijn, Sahin, Valletta Updated results 08/07/2012 3

Historical Shifts in the Beveridge Curve Historical Beveridge Curve Seasonally adjusted; quarterly observations; merged HWI and JOLTS Vacancy rate 6 1960s 1970s 5 1980s 4 1950s 1990s 3 2 2000s 1 0 2 4 6 8 10 12 Unemployment rate Source: BLS, Conference Board, Barnichon (2010) and authors' calculations Daly, Hobijn, Sahin, Valletta Updated results 08/07/2012 4

Estimated Long-Run JCC Historical Job Creation Curve Seasonally adjusted; quarterly data; regression based on pre-2008 data Vacancy rate 6 5.5 5 Before 2007 recession 4.5 4 3.5 3 2.5 2 Since 2007 recession 1.5 Regression: Vacancy rate = -2.7 + 1.2 * Natural rate of unemployment, R-squared = 0.34 1 4.5 5.0 5.5 6.0 6.5 Natural rate of unemployment Source: JOLTS, BLS, CBO, and authors' calculations Daly, Hobijn, Sahin, Valletta Updated results 08/07/2012 5

Estimated JCC and BC Empirical JC curve 5% Fitted Shifted BC 4% Vacancy rate 3% Jun 12 2% 5.6% 7.1% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% Unemployment rate Source: JOLTS, CPS, CBO, and authors' calculations Daly, Hobijn, Sahin, Valletta Updated results 08/07/2012 6

Okun’s Law Okun's Law Based on CBO potential output and NAIRU estimates (1949Q1-now) Unemployment gap 6 5 4 3 2012Q2 2 2007 Recession 1 and after 0 -1 -2 -3 -4 -10 -8 -6 -4 -2 0 2 4 6 Output gap Source: Bureau of Economic Analysis, Bureau of Labor Statistics, Congressional Budget Office, Authors' calculations Daly, Hobijn, Sahin, Valletta Updated results 08/07/2012 7

Industry Mismatch Dispersion Across 15 Major Industries Weighted standard deviation of 12-month employment growth (through July 2012) Percent 7 6 5 4 3 2 1 0 1970 1975 1980 1985 1990 1995 2000 2005 2010 Source: Bureau of Labor Statistics and FRBSF Daly, Hobijn, Sahin, Valletta Updated results 08/07/2012 8