Have Cyclical Movements in the Unemployment Rate Become More Persistent?

63 Pages Posted: 9 Nov 2011

See all articles by Andrew Figura

Andrew Figura

Board of Governors of the Federal Reserve System - Macroeconomic Analysis Section

Date Written: May 26, 2011

Abstract

I examine whether the cyclical behavior of unemployment has changed over the post WWII period. Specifically, I test whether cyclical movements in unemployment have become more persistent. Finding that they have, indeed, become more persistent, I then take some initial steps in explaining why. I find that the increase in persistence has affected private nonfarm payroll employment as well as unemployment and that increased persistence appears to be widespread across industries. At the same time, increased persistence owes primarily to greater persistence in job finding rates and greater persistence in unemployment among permanent job losers. This combination suggests that the welfare loss from cyclical increases in unemployment is becoming increasingly concentrated among permanent job losers who become unemployed for extended durations during cyclical downturns.

Keywords: Unemployment rate, cyclical fluctuations, persistence

JEL Classification: E24, E32, J64

Suggested Citation

Figura, Andrew, Have Cyclical Movements in the Unemployment Rate Become More Persistent? (May 26, 2011). FEDS Working Paper No. 2011-33, Available at SSRN: https://ssrn.com/abstract=1956707 or http://dx.doi.org/10.2139/ssrn.1956707

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