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

Julie L. Hotchkiss and Robert E. Moore

Working Paper 2018-1b
June 2018 (Revised October 2018)

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This paper explores 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 intensity and duration suggests that these two dimensions have differing impacts. However, the benefits of exposure are not enough to overcome the greater negative impact of high unemployment periods on labor market outcomes of disadvantaged groups, making extension of high-pressure economic environments ineffective in reducing labor market gaps.

JEL classification: E60, E24, J64, J31

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

https://doi.org/10.29338/wp2018-1b


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 also 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 in the University of California 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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