Aggregate Labor Conditions and Aerospace Cycles: The Impact of Two Defense Cuts on Los Angeles

Abstract

Adjustment to structural change has been the subject of much discussion at the macroeconomic level. This paper focuses on understanding labor market adjustment speed in two Los Angeles aerospace downturns through an empirical analysis of episodes of structural change. It is found that larger contractions in the declining industries result in fewer prospects in the local economy for immediate employment. This tends to retard the speed of adjustment and explains in part the differential recoveries in Los Angeles.