Robert Hall discusses Separating the Business Cycle from Other Economic Fluctuations at the Federal Reserve Bank of Kansas City’s annual Jackson Hole conference. David Altig claims Hall explained it all. But what does Hall say about the most recent weakening of the labor market?
For example, all practical accounts of the recession of 2001 emphasize the huge decline in high-tech investment. In earlier recessions, declines in home-building were prominent features. On the other hand, more theoretically inclined macroeconomists tend to take a decline in productivity—or at least a pause in the normal growth of productivity—as the central driving force.
The notion that productivity explains fluctuations strikes me as an utter dodge. What is productivity?
Come to think about, we were not convinced either.