Net flows from part-time for noneconomic reasons to part-time for economic reasons contributed substantially to the overall increase in part-time for economic reasons during the Global Financial Crisis in the United States. These transitions may reflect an "added worker effect" or a response to loss of wealth. In that case, the increase in measures of labor market slack that include part-time for economic reasons may overstate the decline in labor demand during that period. Contributions in prior recessions were smaller, or even of opposite sign, and suggest no significant overstatement during those periods.

A large literature finds that workers displaced in mass layoffs experience persistent earnings losses. We find that the earnings penalty from job displacement is mediated by the length of the jobless spell after displacement. Workers who experience little or no joblessness suffer no losses on average; those who experience a prolonged period of joblessness experience large, persistent earnings losses. Job movers who experience joblessness tend to move to lower-paying firms, a phenomenon that informs our understanding of the mechanisms that generate earnings losses. We also find that jobless duration predicts earnings outcomes for separators generally, not only displaced workers. (JEL E24, J24, J31, J62, J63, J64)

Rigidity in wages has long been thought to impede the functioning of labor markets. In this paper, we investigate how the degree of downward nominal wage rigidity in U.S. labor markets has changed over time using job-level data from a nationally representative establishment-based compensation survey collected by the Bureau of Labor Statistics. After defining two types of downward nominal rigidity (operative and potential) often used in macroeconomic models of business fluctuations, we employ three distinct methods to examine the magnitude of downward nominal rigidity in the U.S. labor market, whether each type of rigidity is more or less severe in the presence of negative economic shocks than in more normal economic times, and how the degree of rigidity changed as inflation trended downward. We find no evidence that the high degree of labor market distress during the Global Financial Crisis resulted in a change in the extent of potential downward rigidity in nominal wage changes, though we do observe a downward trend in potential rigidity as wage inflation fell over the broad stretch of our data. In contrast, we find that operative rigidity was both countercyclical and increased at lower rates of inflation. In addition, we find a much lower degree of both types of downward nominal rigidity at multi-year horizons.

Economists have studied the potential effects of shifts in the age distribution on the unemployment rate for more than 50 years. Most of this analysis uses a "shift-share" method, which assumes that the demographic structure has no indirect effects on age-specific unemployment rates. This paper uses state-level data to revisit the influence of the age distribution on unemployment in the United States. We examine demographic effects across the entire age distribution rather than just the youth share of the population -- the focus of most previous work -- and extend the date range of analysis beyond that which was available for previous research. We find that shifts in the age distribution move the unemployment rate in the direction that a mechanical shift-share model would predict. But these effects are larger than the mechanical model would generate, indicating the presence of amplifying indirect effects of the age distribution on unemployment.

Who is harmed by and who benefits from worker reallocation? We investigate the earnings consequences of changing jobs and find a wide dispersion in outcomes. This dispersion is driven not by whether the worker was displaced, but by the duration of joblessness between job spells. Job movers who experience joblessness suffer a persistent reduction in earnings and tend to move to lower-paying firms, suggesting that job ladder models offer a useful lens through which to understand the negative consequences of job separations.

Rigidity in wages has long been thought to impede the functioning of labor markets. In this paper, we investigate the extent of downward nominal wage rigidity in US labor markets using job-level data from a nationally representative establishment-based compensation survey collected by the Bureau of Labor Statistics. We use several distinct methods to test for downward nominal wage rigidity and to assess whether such rigidity is less or more severe in the presence of negative economic shocks than in more normal economic times. We find a significant amount of downward nominal wage rigidity in the United States and no evidence that the high degree of labor market distress during the Global Financial Crisis reduced downward nominal wage rigidity. We further find a lower degree of nominal rigidity at multi-year horizons.

Rigidity in wages has long been thought to impede the functioning of labor markets. One recent strand of the research on wage flexibility in the United States and elsewhere has focused on the possibility of downward nominal wage rigidity and what implications such rigidity might have for the macroeconomy at low levels of inflation. The Great Recession of 2008-09, during which the unemployment rate topped 10 percent and price deflation was at times seen as a distinct possibility, along with the subsequent slow recovery and persistently low inflation, has added to the relevance of this line of inquiry. In this paper, we use establishment-level data from a nationally representative establishment-based compensation survey collected by the Bureau of Labor Statistics to investigate the extent to which downward nominal wage rigidity is present in U.S. labor markets. We use several distinct methods proposed in the literature to test for downward nominal wage rigidity, and to assess whether such rigidity is more severe at low rates of inflation and in the presence of negative economic shocks than in more normal economic times. Like earlier studies, we find evidence of a significant amount of downward nominal wage rigidity in the United States. We find no evidence that the high degree of labor market distress during the Great Recession reduced the amount of downward nominal wage rigidity and some evidence that operative rigidity may have increased during that period.

We analyze how median real incomes in the United States have changed since 1980 under a definition of the middle class that adjusts for changes in demographics. We find that failing to adjust for demographic shifts in the population relating to age, race, and education can indicate a more positive outlook than is truly the case. We also find that the real median incomes of today’s middle class are somewhat higher than they used to be, particularly for households headed by two adults. We find, as in prior research, that prices for housing, healthcare, and education have risen more than middle-class incomes, while prices for transportation, food, and recreation have risen less than middle-class incomes.

We examine persistence in employment-to-population ratios in excess of that implied by persistence in aggregate labor market conditions, among less-educated individuals using state-level data for the United States. Dynamic panel regressions and local projections indicate a moderate degree of excess persistence, which dissipates within three years. We find no significant asymmetry between the excess persistence of high vs. low employment rates. The cumulative effect of excess persistence in the business cycle surrounding the 2001 recession was mildly positive, while the effect in the cycle surrounding the 2008-09 recession was decidedly negative. Simulations suggest that the lasting employment benefits of temporarily running a ?high-pressure? economy are small.

In the FOMC statements following the September and October meetings, the Committee stated that it will be looking for a substantial improvement in the outlook for the labor market in deciding whether to continue or expand its purchases of longer-term assets. In addition, the Committee has been considering including language in the FOMC statement indicating that the lift-off of the funds rate is unlikely to commence until certain conditions prevail, such as the unemployment rate falling below a certain level. Both of these aspects of the FOMC statement elevate the explicit role of labor market conditions in determining the future course of policy and, in doing so, raise some important issues for policymakers to consider.

We examine hysteresis in employment-to-population ratios among less-educated men using state-level data. Results from dynamic panel regressions indicate a moderate degree of hysteresis: The effects of past employment rates on subsequent employment rates can be substantial but essentially dissipate within three years. This finding is robust to a number of variations. We find no substantial asymmetry in the persistence of high vs. low employment rates. The cumulative effect of hysteresis in the business cycle surrounding the 2001 recession was mildly positive, while the effect in the cycle surrounding the 2008–09 recession was, through 2016, decidedly negative. Additional simulations suggest that the employment benefits of temporarily running a “high-pressure” economy are small.

The unemployment rate in the second quarter of this year is on track to average 3⁄4 percentage point less than what the staff had anticipated in the September 2012 Tealbook. (Compare the black and red lines in the top left panel of figure 1.) Given the absence of any material change in our assumptions for the natural rate of unemployment as of the April Tealbook, the surprise in the unemployment rate has translated into a roughly equivalent reduction in the gap between the actual and natural unemployment rates (the blue and red lines in the upper right panel of figure 1), with attendant implications for monetary policy.

The earnings of workers are reduced for many years after being displaced from their jobs, and those workers and their families face increased risk of other problems as well. The ills suffered by displaced workers motivated several recent expansions of government programs, including the unemployment insurance system, and have spurred calls for wage insurance that would provide longer run earnings replacement. However, while the magnitude of the losses is relatively clear, the theory of why displacement matters is scattered and somewhat undeveloped. Much of the policy discussion appears to interpret displacement induced losses through the lens of specific human capital theory, and there is considerable empirical support for that model. But there are several other theories of why job displacement is costly. This paper reviews theories of costly job displacement and discusses their consistency with the available empirical evidence. We find that theories of human capital and matching are an important perspective on the losses of displaced workers, but we cannot rule out important roles for other theories, some of which suggest different policy responses.

This paper describes a dynamic factor model of 19 U.S. labor market indicators, covering the broad categories of unemployment and underemployment, employment, workweeks, wages, vacancies, hiring, layoffs, quits, and surveys of consumers’ and businesses’ perceptions. The resulting labor market conditions index (LMCI) is a useful tool for gauging the change in labor market conditions. In addition, the model provides a way to organize discussions of the signal value of different labor market indicators in situations when they might be sending diverse signals. The model takes the greatest signal from private payroll employment and the unemployment rate. Other influential indicators include the insured unemployment rate, consumers’ perceptions of job availability, and help-wanted advertising. Through the lens of the LMCI, labor market conditions have improved at a moderate pace over the past several years, albeit with some notable variation along the way. In addition, from the perspective of the model, the unemployment rate declined a bit faster over the past two years than was consistent with the other indicators.

Since 2007, the labor force participation rate has fallen from about 66 percent to about 63 percent. The sources of this decline have been widely debated among academics and policymakers, with some arguing that the participation rate is depressed due to weak labor demand while others argue that the decline was inevitable due to structural forces such as the aging of the population. In this paper, we use a variety of approaches to assess reasons for the decline in participation. Although these approaches yield somewhat different estimates of the extent to which the recent decline in participation reflects cyclical weakness rather than structural factors, our overall assessment is that much of the decline is structural in nature. As a result, while we believe some of the participation rate's current low level is indicative of labor market slack, we do not expect the rate to substantially increase from current levels as labor market conditions continue to improve.

This paper extends the literature on the earnings losses of displaced workers to provide a more comprehensive picture of the earnings and employment outcomes for workers who separate. First, we compare workers who separate from distressed employers (presumably displaced workers) and those who separate from stable or growing employers. Second, we distinguish between workers who do and do not experience a spell of joblessness. Third, we examine the full distribution of earnings outcomes from separations - not the impact on only the average worker. We find that earnings outcomes depend much less on whether a job separation is associated with a distressed employer than on whether the separator experienced a jobless spell after the separation. Moreover, we find that workers separating from distressed firms are faster to find jobs at new employers than are other separators.

We use administrative data linking workers and firms to study employer-to-employer flows. After discussing how to identify such flows in quarterly data, we investigate their basic empirical patterns. We find that the pace of employer-to-employer flows is high, representing about 4 percent of employment and 30 percent of separations each quarter. The pace of employer-to-employer flows is highly pro cyclical, and varies systematically across worker, job and employer characteristics. Our findings regarding job tenure and earnings dynamics suggest that for those workers moving directly to new jobs, the new jobs are generally better jobs; however, this pattern is highly procyclical. There are rich patterns in terms of origin and destination of industries. We find somewhat surprisingly that more than half of the workers making employer-to-employer transitions switch even broadly-defined industries (NAICS super-sectors).