Asymmetries in the Cyclical Behaviour of UK Labour Markets

This paper examines the connection between the business cycle, non-linearities and asymmetries in the UK labour market. The economy is shown to display cyclical asymmetries; stochastic properties of variables such as employment, unemployment, real wages and the unemployment-vacancy ratio crucially depend upon the state of the business cycle. We show that in most cases conditioning on the state of the cycle removes residual non-linearities and is more successful than the linear and a number of non-linear time-series models. The robustness of our findings is confirmed using a variety of diagnostics and alternative measures of the cycle.