Comments on Stephanie Aaronson: Labor Force Participations: Recent Developments and Future Prospects
Discussion of Stephanie Aaronson: Labor Force Participations: Recent Developments and Future Prospects:
Robert Hall:
- Unemployment is a suspicious or rather contaminated measure of economic slack in today's economy
- Janet Yellen: "If the cyclical component is abnormally large relative to the unemployment rate then it might be seen as an additional contributor to labor market slack"
- Does a soft labor market discourage workers? The traditional belief is "very little"
- Observed: non-participation rate n and unemployment rate u. Unobserved factors: slack s, and non-participation influence x.
- n = x + γs
- u = s - αx
- s = (u + αn)/(1 + γa)
- This is a problem--but to answer it needs an instrument, which we do not have...
- The discussion has neglected the fact that we need to overshoot on inflation in order to create credibility that we will do the right thing the next time we hit the ZLB...
Jim Stock:
- Aaronson: pure aging 1.6%, cyclical 0.5%, other 1.1%--total 3.2% * What is the residual?: Special cyclical factors from this regression? Non-aging structural shifts?...
- All of Aaronson's residual has emerged since 2011:QI...
- Mean duration of unemployment accounts for all of residual through 2012 and half through today...
Justin Wolfers:
- When you have age and cohort effects you fit every time series... * Given the way they define the cycle, there cannot be any scope for a cyclical recovery in participation because right now there is next to no cycle...
