A New Approach to the Study of Jobless Recoveries

Abstract

This article is concerned with the measurement of jobless recoveries and the elements that may explain their emergence. We first introduce a measure that maps the various elements that define a jobless recovery into a single number that we label the jobless recovery depth. We then construct a database of 389 state‐level observations and study the cross‐sectional variations that emerge. We find that jobless recoveries in the United States are not a nation‐wide phenomena, but a local event confined within a cluster of states that expands slowly between 1975 and 2015. We find the state‐level evidence to be consistent with theories that link jobless recoveries to unusually long expansionary periods, less dynamic labor markets, and the advent of the great moderation. The evidence is not consistent with theories that link them to decreases in union power, increases in income inequality, or increases in health care costs.