| JACKSON HOLE, Wyo.
JACKSON HOLE, Wyo. Aug 22 The deep recession of
2007-2009 dealt no more permanent damage to the U.S. labor
market than other recent downturns, according to a research
paper prepared for a central banking conference that disputed
the notion it left unusually heavy economic scars.
The paper, which will be presented on Saturday to a some of
the world's top central bankers and economists, analyzed what
the authors said was a new set of data on "long-term
nonemployment" and found few things that set the so-called Great
Recession apart from other U.S. recessions since 1981.
The findings could bolster the view of U.S. Federal Reserve
Chair Janet Yellen that the labor market has room to improve
before the central bank needs to raise interest rates from near
Opponents of that view, including some hawkish Fed
policymakers, have argued the recent recession permanently
displaced and disheartened so many workers that the natural
level of unemployment - or the lowest level before wage growth
starts to spur overall inflation - has risen higher.
But the paper's authors, Till von Wachter of the University
of California Los Angeles and Jae Song of the Social Security
Administration, found there was no effective difference from
prior recessions in this respect.
They found a substantial fraction of the labor force lost
jobs in each recession since the early 1980s, resulting in
persistent drops in overall employment.
"Since job loss in the 2008 recession appears to have had
similar medium-term effects on employment, it is unlikely that
hysteresis arising from job loss played a substantially larger
role in this than in other recessions," wrote the authors.
In labor markets, hysteresis represents a permanent change
in which a lower level of overall employment is considered
The paper was one of only a handful prepared for the Kansas
City Federal Reserve Bank's annual central banking conference in
Jackson Hole, Wyoming, at which Yellen and European Central Bank
President Mario Draghi will speak on Friday.
The U.S. unemployment rate was 6.2 percent in July, down
sharply from 7.3 percent a year earlier. Fed policymakers think
it could fall to between 5.2 percent and 5.5 percent without
The central bank has said it plans to hold rates near zero
for a "considerable time" after a stimulative bond-buying
program ends in October in part because of "significant
underutilization of labor resources."
The 79-page paper attempted to determine whether this
underutilization was temporary. To gather the data on long-term
nonemployment, accounting for those having experienced long
spells of joblessness, the authors said they tapped
administrative information on earnings and employment.
(Reporting by Jonathan Spicer; Editing by Paul Simao)