Pascal Michaillat, Emmanuel Saez, 19 April 2022

Empirically, the unemployment rate is inversely related to the vacancy rate. Furthermore, servicing a job opening costs about as much as one job in terms of resources. This column shows that the labour market minimises waste when the unemployment rate equals the vacancy rate. It is too slack when the unemployment rate is higher and too tight when it is lower. Consequently, the efficient unemployment rate is simply given by the geometric average of the current unemployment and vacancy rates. At the beginning of 2022, the US labour market is excessively tight, and tighter than at any point since 1951.

Carlos Carrillo-Tudela, Camila Comunello, Alex Clymo, Annette Jäckle, Ludo Visschers, David Zentler-Munro, 07 April 2022

The strength of the labour market recovery from Covid-19, and the extent of the economic scarring, depend on both job creation and whether job seekers look for jobs in the growing sectors of the economy. This column uses a novel dataset to provide direct evidence on the types of jobs sought by workers during the pandemic. It shows that workers increasingly targeted jobs in expanding occupations and industries. Nevertheless, a significant proportion of workers targeted jobs in declining occupations and industries. These workers tend to be the most disadvantaged: the non-employed and those with the lowest education qualifications.

Antoine Bertheau, Edoardo Maria Acabbi, Cristina Barceló, Andreas Gulyas, Stefano Lombardi, Raffaele Saggio, 11 March 2022

Studying the consequences of job loss can help us understand the extent to which labour markets efficiently reallocate unemployed workers to new jobs. Using a dataset that combines administrative records from seven countries with diverse labour market institutions, this column finds that the consequences of losing one’s job vary across countries. Workers in Denmark and Sweden experience the lowest earnings declines following job loss, while workers in Italy, Spain, and Portugal experience losses three times as high. Labour market institutions have the potential to mitigate these differences.

Pragyan Deb, Davide Furceri, Jonathan D. Ostry, Nour Tawk, Naihan Yang, 02 February 2022

Countries worldwide launched wide-scale fiscal support measures to mitigate the unprecedented output losses caused by lockdowns aimed at flattening the COVID-19 curve. This column examines the effects of fiscal policy measures during the pandemic, using a novel database of daily fiscal policy announcements and high-frequency economic indicators for 52 countries from January 1 to December 31, 2020. The authors find that fiscal policy announcements have been effective in stimulating economic activity, boosting confidence, and reducing unemployment, but their effect varies by the type of measure and the stage of the pandemic. 

Pierre Cahuc, Pauline Carry, Franck Malherbet, Pedro S. Martins, 20 January 2022

In 2009, Portugal restricted the use of fixed-term contracts by firms with over 750 employees. This column finds that while the reform was successful in reducing the number of fixed-term jobs, it did not increase the number of permanent contracts and it decreased employment in large firms. Despite positive spillovers on small firms, the reform reduced total employment and had negative effects on the welfare of employees and unemployed workers.

Ulrike Malmendier, 29 October 2021

When we live through a financial crisis, many of us think differently about money afterwards. Neuroscientists can show that the experience changes the physical structure of our brains, and Ulrike Malmendier tells Tim Phillips how this should also change the way that economists think about preferences for risk.

Read more about the research presented and download the free Discussion Paper

Malmendier, U. 2021. 'Experience Effects in Finance: Foundations, Applications, and Future Directions'.

Alex Bryson, David Blanchflower, 21 October 2021

Economic downturns are not as unpredictable as we once thought. There is mounting evidence that the expectations of consumers, workers and employers predict economic downturns, sometimes 12 to 18 months ahead. But we live in exceptional times. The COVID-19 pandemic and its aftermath have sown doubt and uncertainty among consumers and producers and may do so for some time to come. So what’s the economic prognosis? this column argues that expectations data for the US suggest the country is entering recession about now.

Wouter den Haan, Lukas B. Freund, Pontus Rendahl, 11 September 2021

It has been argued that increased uncertainty can worsen unemployment if employers prefer to wait and postpone job creation. However, under the dominant theory of unemployment – the search-and-matching model – the value of waiting plays no role. This column proposes an amended model which relaxes some of the theoretical assumptions, and shows that an increase in perceived uncertainty does indeed increase the value of waiting, thus reducing job creation.

Alex Bryson, David Blanchflower, 24 August 2021

When Queen Elizabeth II asked economists why none of them had seen the Great Recession coming, they presented her with a number of reasons but forgot to mention the main one: they hadn’t paid attention to ‘red lights’ that had been flashing in the qualitative survey data from consumers and producers that predicted the downturn. Chief among these was the fear of unemployment which, as this column shows, predicts upticks in unemployment 12 months ahead.

Martin Ravallion, 03 August 2021

Economists have long debated the most effective metrics for measuring poverty and inequality. This column presents analysis of the relative importance of three prominent macroeconomic indicators – the rate of unemployment, the inflation rate, and the growth rate of GDP per capita. Using evidence from the US, the author argues that higher unemployment rates unambiguously increase poverty measures, but that inflation matters more in the middle and upper-middle of the distribution than in the tails.

Jose Maria Barrero, Nicholas Bloom, Steven Davis, 27 July 2021

Employers in the US are grappling with whether and how to bring employees back to the office or other place of work. Using survey-based evidence, this column finds that four in ten Americans who currently work from home at least one day a week would seek another job if employers require a full return to business premises, and most workers would look favourably on a new job that offers the same pay with the option to work from home two or three days a week. High rates of quits and job openings in recent months appear to partly reflect a re-sorting of workers based on the scope for remote working.  

Benjamin Artz, David Blanchflower, Alex Bryson, 28 May 2021

The US labour market is producing too few jobs and those it is producing are often low paid and of poor quality. This is exacerbated by the fact that workers do not have the means to fix their problems at work because of a precipitous decline in union membership over the last half century, particularly in the private sector. Using panel data from the National Longitudinal Survey of Youth 1979 and 1997 cohorts and from the Bureau of Labor Statistics, this column shows that union density is now on the rise and that union workers are now more satisfied than non-union workers. Unions’ ability to help workers avoid underemployment suggests that what seems to have changed is the value attached to the insurance component of the union good.

Laurence Ball, Gita Gopinath, Daniel Leigh, Prachi Mishra, Antonio Spilimbergo, 07 May 2021

How high is the ongoing US fiscal expansion likely to push inflation? This column presents new evidence that underlying (weighted median) CPI inflation has so far steadily declined since the start of the COVID-19 crisis, broadly as predicted by its historical Phillips curve relation. If the ongoing fiscal expansion reduces unemployment to 1.5-3.5%, as some predict, underlying inflation could rise to about 2.5-3% by 2023. If the fiscal expansion is temporary and monetary policy remains clearly communicated and decisive, there is little risk of a 1960s-type inflationary spiral.

Ulrike Malmendier, Leslie Sheng Shen, 15 March 2021

Economic crises have prolonged consequences on consumer behaviour, beyond effects captured by standard economic variables. Standard life-cycle consumption channels often fail to explain these lasting effects. This column argues that economic downturns ‘scar’ consumers in the long run. Consumers who have lived through times of high unemployment remain pessimistic about the future financial situation, spend less in future years, and accumulate more savings, controlling for income, wealth, and employment. These results suggest a novel micro-foundation of fluctuations in aggregate demand and imply long-run effects of macroeconomic shocks. 

Naomitsu Yashiro, Tomi Kyyrä, Hyunjeong Hwang, Juha Tuomala, 12 March 2021

Across OECD countries, promoting longer working lives is an important policy objective for mitigating fiscal pressures from population ageing. This column uses data from Finland to examine how technological change and access to early retirement pathways reinforce each other in pushing older workers out of employment. It finds that the probability of leaving employment is higher for individuals in occupations with higher automation risks and increases faster for individuals closer to the eligible age for early retirement pathways.Reforms that tighten access to such pathways substantially extend the working lives of older workers exposed to high automation risks, but have little effect on old workers exposed to low automation risks.

Ammar Farooq, Adriana Kugler, Umberto Muratori, 07 February 2021

Economists have long debated whether extensions to unemployment insurance benefit durations help or hinder the labour market. Using US administrative microdata, this column shows that the generosity of unemployment insurance benefits has a positive effect on the labour market by improving job match quality. Importantly, these benefits are greater for women as well as for minority and less educated workers. In light of the current economic crisis, giving ideally suited workers and firms sufficient time to find each other can be part of the healing. 

Andreas I. Mueller, Johannes Spinnewijn, Giorgio Topa, 29 January 2021

Longer spells of unemployment are associated with worse employment prospects, but there has been no consensus in the literature on what drives the decline in employment prospects. This column uses data on elicited beliefs of unemployed job seekers to uncover the forces driving long-term unemployment. It shows that 85% of the decline in job-finding rates is due to intrinsic differences across job-finding ‘types’, rather than a deterioration of skills during unemployment. Improving job seekers’ information about employment prospects may help reduce costly long-term unemployment.

Cevat Giray Aksoy, Panu Poutvaara, Felicitas Schikora, 11 December 2020

Around 2.4 million refugees and irregular migrants arrived in Europe from 2015 to 2016. This column presents systematic evidence on how local unemployment and attitudes towards immigrants at refugees’ initial place of residence shape their multi-dimensional integration in the context of the European refugee crisis. Leveraging Germany’s centralised allocation policy, which exogenously assigns refugees to live in specific counties, it finds that high initial local unemployment negatively affects refugees’ economic and social integration. Further, favorable attitudes towards immigrants promote the economic and social integration of refugees.

Gordon Betcherman, Mauro Testaverde, 18 November 2020

The Covid-19 crisis has profoundly affected employment everywhere, but countries have adopted different strategies to try to mitigate the worst of the effects. This column compares the Greek experience to the rest of Europe, as well as to North America. The authors conclude that given the nature of the pandemic, models for managing labour market shocks will need to offer extended support where the shock persists or reoccurs. Crucially, successful policy approaches will need to be well suited for enabling job creation once conditions are in place for a restart.

Alex Rees-Jones, John D'Attoma, Amedeo Piolatto, Luca Salvadori, 04 November 2020

While few groups have weathered the Covid-19 crisis unscathed, recent evidence suggests that the damage has been especially extreme among the economically vulnerable. This column evaluates changing attitudes towards welfare spending as a result of the pandemic. The findings suggest that people living in areas most severely hit by the crisis are increasingly supportive of long-term reforms to the welfare system. Despite having access to relatively widespread welfare spending, European citizens are dissatisfied with the safety net systems currently in place. 

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