The stagnant labor market: some aspects of the bleak picture

Abstract

In this paper, we examine the labor market during the Great Recession and find some startling features underlying the stagnation and decline of 2007-10. The population in the labor force has stagnated while the population that is out of the labor force has grown sharply. For the first time since we have had adequate data, the likelihood of an individual leaving the labor force from being unemployed is higher than the likelihood that he or she will move from unemployment to employment. We argue that the most plausible reasons for the continued slump in the labor market have to do with inadequate aggregate demand and are not because of structural or skill-mismatch reasons.

Keywords:

• aggregate demand
• cyclical
• labor market
• labor transitions
• structural
• underemployment
• unemployment