Who benefits from a strong economy?
The US unemployment rate is expected to remain below 4 percent through 2021. This implies that the US unemployment rate will remain for much of the next few years ½ percentage point or more below its estimated long-run sustainable level. Aaronson and al. find evidence that Okun’s law, which suggests that in a high pressure economy disadvantaged groups of workers benefit disproportionately, holds. In particular, their results show that when the labor market is already strong, a further increment of strengthening provides a modest extra benefit to some disadvantaged groups, relative to earlier in the labor-market cycle. In addition, these gains are somewhat persistent for African Americans and women.
Okun Revisited: Who Benefits Most from a Strong Economy
Authors: Stephanie R. Aaronson, Mary C. Daly, William L. Wascher, David W. Wilcox
From: Federal Reserve Board
Is the US a high pressure economy right now? – Okun’s law and potential output
In this paper Fontanari and al. propose an alternative way to calculate potential output. Their method is based on an update of Arthur M. Okun’s original method for estimating potential output, which, differently from the estimation methods currently in use, does not rely on the notion of NAIRU. Their calculations indicate that the U.S. economy (in July 2019) is nowhere near full employment. They estimate potential output based on data on actual unemployment using Okun’s law and find (for 2019Q1) that U.S. output is still 2.4% lower than potential output and 3.6% below full-employment output.
Potential Output in Theory and Practice: A Revision and Update of Okun’s Original Method
Authors: Claudia Fontanari, Antonella Palumbo, Chiara Salvatori
From: Universita di Roma Tre
