Amerisclerosis? The Puzzle of Rising U.S. Unemployment Persistence Written By: Olivier Coibion, Yuriy Gorodnichenko, Dmitri Koustas Presented By: Drew Geissbuhler, Charles Meixelsperger, Jeffrey Zorr

Key Points ●Similarities between Great Recession and Europe in the 1980s ●Differences in recent recessions ●Economic shocks/policy factors

Background Information ●Early 1980s US and Western Europe both experience recessions ●Western Europe had a prolonged recession compared to the U.S ●1990, 2001, and 2007 recessions all experienced persistent unemployment

The Great Recession and the 1980s Recessions

Similarities Between 1980 Western Europe Recession and U.S. now ●People were unwilling to move for jobs ●Cultural Morals were low in 1980 Europe. ●Average age of unemployed getting older

Differences in recent Recessions ●Long term unemployment has risen greatly. ●Slow rate of Convergence. ●Disability claims have gone up.

Scaled Unemployment Patterns across U.S. Recessions

Economic Shocks ●Account for initial rise in unemployment. ●Many shocks in sequence can account for extended unemployment. ●Not the case for recent post 1990 persistence.

Policy Changes Pre 1990 ●Small change in budget balance and government deficit. ●The policies of Pre 1990 Recessions are less Contractionary. Post 1990 ●Both 2001 and 2007 recessions show a large change in deficit. ●If policy makers would have chosen similar actions to pre Unemployment would have recovered faster. ●More Contractionary.

Conclusion ●U.S. economy has shown a slow recovery. ●Post WWII and pre 1990 showed very quick recovery from the recession. ●The authors disprove many factors believed to have great effect on unemployment persistence. ●Implementation of new monetary and fiscal policies that adjust to new information help hasten unemployment recovery.

Conclusion (continued) ●Great Recession and future U.S. downturns are likely to last longer than those of the past so fiscal policy must adjust accordingly. ●Fiscal policies should target longer-lived projects that focus on the long run rather than short run investments like more recent policies.