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Federal Reserve Bank of San Francisco
FRBSF Economic Letter
Stock-market-based measures of sectoral shocks and the unemployment rate
Puneet Chehal
Prakash Loungani
Bharat Trehan
Abstract

Downturns in the construction and finance sectors played a significant role in the recent recession. A stock-market-based measure that captures sectoral shocks shows that these disturbances are important for explaining long-duration unemployment. This is consistent with the intuition that sectoral shocks cause workers to engage in time-consuming moves across industries in their searches for work. It also suggests that it will take a while before the more than 1.8 million unemployed construction workers and close to a half million unemployed finance and insurance workers find jobs.


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Puneet Chehal & Prakash Loungani & Bharat Trehan, "Stock-market-based measures of sectoral shocks and the unemployment rate" , Federal Reserve Bank of San Francisco, FRBSF Economic Letter, number 23, 2010.
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Keywords: Unemployment ; Employment ; Construction industry ; Financial services industry
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