Zooming the Ins and Outs of the U.S. Unemployment with a Wavelet Lens

29 Pages Posted: 11 Jun 2018

See all articles by Pedro Portugal

Pedro Portugal

Bank of Portugal - Research Department; New University of Lisbon; IZA Institute of Labor Economics

Antonio Rua

Bank of Portugal - Economic Research Department

Abstract

To better understand unemployment dynamics it is key to assess the role played by job creation and job destruction. Although the U.S. case has been studied extensively, the importance of job finding and employment exit rates to unemployment variability remains unsettled. The aim of this paper is to contribute to this debate by adopting a novel lens, wavelet analysis. We resort to wavelet analysis to unveil time- and frequency-varying features regarding the contribution of the job finding and job separation rates for the U.S. unemployment rate dynamics. Drawing on this approach, we are able to reconcile some apparently contradictory findings reported in previous literature. We find that the job finding rate is more influential for the overall unemployment behavior but the job separation rate also plays a critical role, especially during recessions.

Keywords: worker flows, job separation rate, job finding rate, wavelets

JEL Classification: C10, E24, E32

Suggested Citation

Portugal, Pedro and Rua, Antonio, Zooming the Ins and Outs of the U.S. Unemployment with a Wavelet Lens. IZA Discussion Paper No. 11559, Available at SSRN: https://ssrn.com/abstract=3193313

Pedro Portugal (Contact Author)

Bank of Portugal - Research Department ( email )

Av. Almirante Reis 71, 6th
Lisbon 1150-012
Portugal
+351 21 313 0000 (Phone)
+351 21 814 3841 (Fax)

New University of Lisbon

Lisbon, 1099-085
Portugal

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Antonio Rua

Bank of Portugal - Economic Research Department ( email )

R. do Ouro, 27
Lisboa, 1100-150
Portugal

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