Nonlinear evidence on the existence of jobless recoveries

Abstract

Abstract The sluggish growth in employment following the Great Recession has spurred research into investigating its cause. Economists are split as to whether it reflects the advent of “jobless recoveries” or just reflects “slow recoveries” in which both output and employment are slow to recover. We estimate a version of Friedman’s plucking model to investigate this issue. We find evidence suggesting that employment does have its own dynamic response after a recession. Some of the slow growth in employment can be ascribed to the slow output growth, but there is a remaining portion which is consistent with the jobless recovery hypothesis. We then produce evidence relative to four different hypothesis of why jobless recoveries have occurred.