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Status: Will be live at 02/11/2021 07:35

Global Macro Views: Full Employment Output Gaps

  • The US is debating whether a $1.9 tn fiscal stimulus will lead to overheating, …
  • a discussion that hinges critically on just how much slack there is in the economy.
  • Output gaps are very difficult to measure, as we have argued on previous occasions.
  • But employment data are easy to come by and put output gap estimates in perspective.
  • We document fall-out from COVID-19 on prime-age employment across key economies.
  • The decline in US prime-age employment validates the CBO output gap of -4.4 percent.
  • Depressed employment in Europe even before COVID-19 points to large output gaps.