News Release

CHICAGO — Local markets with more concentrated alcohol sales display more creative destruction, concludes research in the latest issue of Economic Perspectives. Researchers Jaap Abbring, a fellow at the Free University of Amsterdam-Royal Netherlands Academy of Arts and Sciences, and Chicago Fed Senior Economist Jeffrey Campbell in the article "Creative destruction in local markets" (152KB), use a panel of Texas restaurants' and bars' alcohol tax returns to measure the pace of creative destruction — the ongoing replacement of unproductive competitors with new firms. The researchers also conclude that producers in more concentrated markets do not use their market power to stabilize the industry structure.

• In "Assessing the jobless recovery" (112KB), Chicago Fed economists Daniel Aaronson, Ellen Rissman, and Daniel Sullivan review trends in employment growth during the recent recovery, including new evidence that much of the increase in self-employment since the beginning of the recession is likely a reflection of the weak labor market conditions of the last three years. The authors also offer thoughts on the strengths and weaknesses of several explanations for the disappointing employment growth of the last few years. They argue that sectoral reallocation, health insurance costs, and falling labor supply are unlikely to be major culprits, but that just-in-time hiring and inadequate aggregate demand likely have played a larger role in the weak hiring trends.
  
• In another article by Aaronson, Rissman, and Sullivan, titled "Can sectoral reallocation explain the jobless recovery?" (997KB), the authors conclude that the need to reallocate employment across industries was lower during the most recent two recessions than in previous business cycles. By reconsidering the case for sectoral labor reallocation's role in the jobless recovery, the authors review and critique previous attempts by other researchers to measure sectoral reallocation.
  
• The current labor market may not be as weak as some think, concludes Chicago Fed economist Lisa Barrow in "Is the official unemployment rate misleading? A look at labor market statistics over the business cycle" (127KB). Barrow notes that the lack of increase in payroll employment leads many to conclude that official unemployment rates understate current labor market weakness. However, along several other dimensions, the current labor market reflects more strength than in many prior recovery periods.

For the full text, see the Second Quarter 2004 issue of Economic Perspectives.