Some Like It Hot: Assessing Longer-Term Labor Market Benefits from a High-Pressure Economy

Julie L. Hotchkiss and Robert E. Moore

Working Paper 2018-1
January 2018

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This paper explores the evidence for positive hysteresis in the labor market. Using data from the National Longitudinal Surveys of Youth, we find that negative labor market outcomes during high-unemployment periods are mitigated by exposure to a high-pressure economy during the preceding expansion. Breaking total exposure into average intensity and duration suggests that these two dimensions have differing impacts depending on the outcome. Additionally, benefits are typically only statistically significantly different from no exposure for only a relatively few demographic groups.

JEL classification: E60, E24, J64, J31

Key words: hysteresis, unemployment, labor market gaps, labor force participation, wage gaps


This research was conducted with restricted access to U.S. Bureau of Labor Statistic (BLS) data. Research assistance from Kalee Burns, Ellie Terry, Taylor Kelley, and Deepmala Pokhriyal is much appreciated, and the authors thank Lisa Cook, Mary Daly, Bruce Fallick, Patrick Higgins, Carl Hudson, Pia Orrenius, Melinda Pitts, William Roberds, John Robertson, William Spriggs, Sam Schulhofer-Wohl, and the participants of the California State University-Long Beach Economics Department Seminar Series for helpful comments and suggestions. The views expressed here are the authors’ and not necessarily those of the Federal Reserve Bank of Atlanta, the Federal Reserve System, or the BLS. Any remaining errors are the authors’ responsibility.
Please address questions regarding content to Julie L. Hotchkiss (contact author), Research Department, 1000 Peachtree Street NE, Atlanta, GA 30309-4470, 404-498-8198, julie.l.hotchkiss@atl.frb.org, or Robert E. Moore, Office of the Dean, Department of Economics, Andrew Young School of Policy Studies, Georgia State University, P.O. Box 3992, Atlanta, GA 30302-3992, rmoore@gsu.edu.
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