Does technological progress, capital, labour, and categorical economic policy uncertainty influence unemployment? Evidence from the USA

Abstract

This research undertakes an examination of the Okun Model and re-evaluates its relationship within the context of the United States, spanning from January 1990 to May 2022. Employing the ARDL estimation, the study discerns that, over the long term, fiscal policy and trade policy exert upward pressure on the unemployment rate. Contrarily, the Consumer Price Index wields a statistically significant and detrimental influence on unemployment, driving it downwards. Furthermore, the results derived from the Markov-Switching Dynamic Regression analysis, when contemplating high-growth unemployment over the long term, illuminate noteworthy insights. Specifically, variables such as Gross Formation Capital Fixed multiplied by Capacity Utilization and Employment Level multiplied by Labour Force Participation are statistically significant with negative effects on unemployment. In contrast, Monetary Policy Uncertainty is linked to an anticipated increase in the unemployment rate. Therefore, this paper will be of interest to a wide range of labour market economic agents. As is known, investors’ feelings on monetary policy and fiscal policy can shape US economic apprehension.