Hysteresis and persistent long-term unemployment: the American Beveridge Curve of the Great Depression and World War II

Expectations and forecasting during the Great Depression: Real-time evidence from the business press

“…In late 1929, the number of nowcasts and forecasts is roughly equal, while by 1932 there were half as many forecasts as nowcasts. The unwillingness to forecast, given the high degree of uncertainty during this period (Mathy 2015), is consistent with ambiguity aversion (Ellsberg 1961), where forecasters choose not to participate given the inability to assign probabilities to future outcomes.…”

Revisiting the hysteresis hypothesis: an ARIMAX approach

“…Arulampalam et al (2000), for example, use the British Household Panel Survey to demonstrate that British individuals' past employment states directly affect their future labour market fortunes, "perhaps because of depreciation of human capital, or because employers use an individual's previous labour market history as a screening mechanism." Elsby et al (2015) provide a useful discussion of this issue in the context of the Beveridge curve, and Mathy (2018) examines duration effects in the US Beveridge curve during the Great Depression. Of particular interest are Kroft et al (2013) and Farber et al (2016), which examine the existence of duration dependence by sending fictitious job applications to US employers, and Eriksson and Rooth (2014), who do the same for Swedish employers.…”

Macroeconomic lessons from the past decade

“…And while the postwar United States has not seen sustained demand shocks on the level of the Great Recession, history does suggest that large demand shifts can have large, persistent effects on labour force participation rates. The fall in employment in the 1930s, for instance, reflected not only elevated unemployment rates but also a large fall in measured participation rates; participation then rose even more sharply with the 'effectively unlimited labour demand' during the war (Mathy 2018). Arguments implying that the United States today is at potential would, in 1940, have ruled out the large increase in employment that took place during the war.…”

“…While the postwar United States has not seen sustained demand shocks on the level of the Great Recession, history does suggest that large demand shifts can have large, persistent effects on labour force participation rates. The fall in employment in the 1930s, for instance, reflected not only elevated unemployment rates but also a large fall in measured participation rates (Mathy 2018).…”