Did the labour market de-couple from movements of the real aconomy?

Did the labour market de-couple from movements of the real aconomy?

The job market today seems more resistant to crises than it did at the dawn of 2005. Signs of this improvement in market health are supported by the change in long-term unemployment, which is showing a noncyclical drop. Measures towards greater flexibility of job markets may also have contributed to improving the resilience of the labour market to a crisis-induced economic slowdown. It is probable that this time the potentially cyclical rise in unemployment may not turn out as high and as chronic as was the case before 2005. It can also be conjectured that a drop in employment will not be felt as immediately as in the previous recession, due to a lower number of "precautionary" job cuts that will be implemented this time around, which in turn has resulted from the introduction of temporary employment, greater wage-differentiation, and business exemption clauses. The core of this short expert report entails an examination of the thesis that the labour market resilience to shocks has improved in the recent time and, as a consequence, the relationship between business cycle dynamics, cyclical unemployment, and structural unemployment has changed. Our report investigates this conjecture on a short-term basis, relying on current empirical evidence.

Project members

Wolfgang Franz

Wolfgang Franz

Project Coordinator
Former President

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