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Working Paper
Aggregate Labor Force Participation and Unemployment and Demographic Trends
We estimate trends in the labor force participation (LFP) and unemployment rates for demographic groups differentiated by age, gender, and education, using a parsimonious statistical model of age, cohort, and cycle effects. Based on the group trends, we construct trends for the aggregate LFP and unemployment rate. Important drivers of the aggregate LFP rate trend are demographic factors, with increasing educational attainment being important throughout the sample, ageing of the population becoming more important since 2000, and changes of groups' trend LFP rates, e.g., for women prior to ...
Blog
Back-of-the-Envelope Estimates of Next Quarter’s Unemployment Rate
Layoffs are certainly one of the effects of battling COVID-19. What sort of unemployment rate might we see in the second quarter of 2020?
Working Paper
The Role of News about TFP in U.S. Recessions and Booms
We develop a general equilibrium model to study the historical contribution of TFP news to the U.S. business cycle. Hiring frictions provide incentives for firms to start hiring ahead of an anticipated improvement in technology. For plausibly calibrated hiring costs, employment gradually rises in response to positive TFP news shocks even under standard preferences. TFP news shocks are identified mainly by current and expected unemployment rates since periods in which average unemployment is relatively high (low) are also periods in which average TFP growth is slow (fast). We work out the ...
Working Paper
Declining Labor Force Attachment and Downward Trends in Unemployment and Participation
The U.S. labor market witnessed two apparently unrelated secular movements in the last 30 years: a decline in unemployment between the early 1980s and the early 2000s, and a decline in participation since the early 2000s. Using CPS micro data and a stock-flow accounting framework, we show that a substantial, and hitherto unnoticed, factor behind both trends is a decline in the share of nonparticipants who are at the margin of participation. A lower share of marginal nonparticipants implies a lower unemployment rate, because marginal nonparticipants enter the labor force mostly through ...
Working Paper
How Large were the Effects of Emergency and Extended Benefits on Unemployment during the Great Recession and its Aftermath?
This paper presents estimates of the effect of unemployment benefit extensions during the Great Recession on unemployment and labor force participation. Unlike many recent studies of this subject, our estimates, following the work of Hagedorn, Karahan, Manovskii, and Mitman (2016), are inclusive of the effects of benefit extensions on employer, as well as, worker behavior. To identify the effect of benefit extensions, we use plausibly exogenous changes in the rules governing benefit extensions and their differential effects on the maximum duration of benefits across states. We find that the ...
Working Paper
Adjusted Employment-to-Population Ratio as an Indicator of Labor Market Strength
As a measure of labor market strength, the raw employment-to-population ratio (EPOP) confounds employment outcomes with labor supply behavior. Movement in the EPOP depends on the relative movements of the employment rate (one minus the unemployment rate) and the labor force participation rate. This paper proposes an adjustment to the calculation of the EPOP using individual microdata to account for both individual characteristics and the probability of labor force participation, which can used to assess the strength of the labor market.
Working Paper
The Effects of Unemployment Benefits on Unemployment and Labor Force Participation: Evidence from 35 Years of Benefits Extensions
This paper presents estimates of the effect of emergency and extended unemployment benefits (EEB) on the unemployment rate and the labor force participation rate using a data set containing information on individuals likely eligible and ineligible for EEB back to the late 1970s. To identify these estimates, we examine how exit rates from unemployment change across different points of the distribution of unemployment duration when EEB is and is not available, controlling for changes in labor demand and demographic characteristics. We find that EEB increased the unemployment rate by about ...
Working Paper
Assessing the Change in Labor Market Conditions
This paper describes a dynamic factor model of 19 U.S. labor market indicators, covering the broad categories of unemployment and underemployment, employment, workweeks, wages, vacancies, hiring, layoffs, quits, and surveys of consumers' and businesses' perceptions. The resulting labor market conditions index (LMCI) is a useful tool for gauging the change in labor market conditions. In addition, the model provides a way to organize discussions of the signal value of different labor market indicators in situations when they might be sending diverse signals. The model takes the greatest signal ...
Working Paper
Measuring Labor-Force Participation and the Incidence and Duration of Unemployment
The underlying data from which the U.S. unemployment rate, labor-force participation rate, and duration of unemployment are calculated contain numerous internal contradictions. This paper catalogs these inconsistencies and proposes a reconciliation. We find that the usual statistics understate the unemployment rate and the labor-force participation rate by about two percentage points on average and that the bias in the latter has increased since the Great Recession. The BLS estimate of the average duration of unemployment overstates by 50% the true duration of uninterrupted spells of ...
Discussion Paper
Okun’s Law and Long Expansions
Economic forecasters frequently use a simple rule of thumb called Okun's law to link their real GDP growth forecasts to their unemployment rate forecasts. While they recognize that temporary deviations from Okun's law may occur, forecasters often assume that sustained reductions in the unemployment rate require robust GDP growth. However, our analysis suggests that Okun's law has not been a consistently reliable tool for predicting the size of declines in the unemployment rate during the last three expansions—a finding that reflects the impact of changes in the labor market since the early ...