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The Great Recession in the UK Labour Market: A Transatlantic Perspective

Published online by Cambridge University Press:  26 March 2020

Michael W.L. Elsby  and
Jennifer C. Smith
Michael W.L. Elsby
Affiliation:
University of Michigan and NBER
Jennifer C. Smith
Affiliation:
University of Warwick
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Abstract

The increase in unemployment in the United Kingdom that accompanied the Great Recession has been conspicuous by its moderation. The rise in joblessness is dwarfed by the recent experience of the United States, by past recessionary episodes in the UK and by the contraction in GDP in the UK. Increased rates of job loss have played a dominant role in shaping the rise in British unemployment. Unemployment duration has not increased to the levels seen in previous recessions, in contrast to the US where duration substantially exceeds previous peaks. Looking forward, the UK labour market appears to have adjusted fully to the shocks that prompted the recession. Signs of reductions in match efficiency witnessed recently in the US are not mirrored in the UK. In contrast, while long-term unemployment currently remains well below historical levels, recent estimates of job finding rates suggest that it has the potential to rise much further. Thus, a timely recovery in aggregate demand will play an important role in averting persistently high unemployment in the future.

Keywords

Labour marketbusiness cycleunemploymentworker flowsE24J6
Type
Research Articles
Information
National Institute Economic Review , Volume 214 , October 2010 , pp. R26 - R37
Copyright
Copyright © 2010 National Institute of Economic and Social Research

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Footnotes

∗

We would like to thank Jonathan Wadsworth, Simon Kirby and two anonymous referees for constructive comments. Some of the empirical analysis for the United States in this paper draws from Elsby, Hobijn and Sahin (2010).

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