BPEA | Spring 2019

Okun revisited: Who benefits most from a strong economy?

Commuters make their way to work after departing a city bus in downtown Los Angeles, California, U.S., October 24, 2018. REUTERS/Mike Blake
Editor's note:

This paper is part of the Spring 2019 edition of the Brookings Papers on Economic Activity, the leading conference series and journal in economics for timely, cutting-edge research about real-world policy issues. Research findings are presented in a clear and accessible style to maximize their impact on economic understanding and policymaking. The editors are Brookings Nonresident Senior Fellow and Northwestern University Professor of Economics Janice Eberly and Brookings Nonresident Senior Fellow and Harvard University Professor of Economics James Stock. Read summaries of all six papers from the journal here.


Previous research has shown that the labor market experiences of less advantaged groups are more cyclically sensitive than the labor market experiences of more-advantaged groups; in other words, less advantaged groups experience a high-beta version of the aggregate fluctuations in the labor market. For example, when the unemployment rate of whites increases by 1 percentage point, the unemployment rates of African Americans and Hispanics rise by well more than 1 percentage point, on average. This behavior is observed across other labor-market indicators, and is roughly reversed when the unemployment rate declines. We update this work to include the post-Great Recession period and extend the analysis to consider whether these high-beta relationships change when the labor market is especially tight. We find suggestive evidence that when the labor market is already strong, a further increment of strengthening provides some extra benefit to some disadvantaged groups, relative to earlier in the labor market cycle. In addition, we provide some evidence suggesting that these gains are persistent, at least for a while, for some groups, particularly blacks and women.


Aaronson, Stephanie R., Mary C. Daly, William Wascher, David W. Wilcox. 2019. “Okun Revisited: Who Benefits Most From a Strong Economy?” Brookings Papers on Economic Activity, Spring, 333-404.


Stephanie Aaronson is the Vice President and Director of the Economic Studies program at the Brookings Institution; Mary Daly is the President and Chief Executive Officer of the Federal Reserve Bank of San Francisco; William Wascher is Deputy Director of the Division of Research and Statistics at the Federal Reserve Board of Governors; and David Wilcox is the former Director of the Division of Research and Statistics of the Federal Reserve Board of Governors . Beyond these affiliations, the authors did not receive financial support from any firm or person for this paper or from any firm or person with a financial or political interest in this paper. They are currently not officers, directors, or board members of any organization with an interest in this paper. No outside party had the right to review this paper before circulation. The views expressed in this paper are those of the authors, and do not necessarily reflect those of the Brookings Institution, the Federal Reserve Bank of San Francisco, or the Federal Reserve Board of Governors.