The impact of oil price shocks on US labor productivity and employment hours

We use a structural vector autoregressive (SVAR) model to study the effects of oil market shocks on US labor productivity and employment hours, where identification occurs through a combination of short- and long-run exclusion restrictions. The results show that labor productivity is responsive to all sides of the oil market, with employment hours responding only to demand-side forces. Further, oil market shocks explain roughly 25% of the long-run variation in both variables. Among oil market shocks, oil-specific demand shocks contribute to most of the historical fluctuations in labor productivity, while aggregate demand shocks matter most for fluctuations in employment hours.