Measuring Labor-Force Participation and the Incidence and Duration of Unemployment

53 Pages Posted: 17 Jul 2019

See all articles by Hie Joo Ahn

Hie Joo Ahn

Board of Governors of the Federal Reserve System

James D. Hamilton

University of California at San Diego; National Bureau of Economic Research (NBER)

Date Written: 2019-05-17

Abstract

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 unemployment and misrepresents what happened to average durations during the Great Recession and its recovery.

Keywords: Labor-Force Participation Rate, Measurement Errors, Unemployment Duration, Unemployment Rate

JEL Classification: C5, J6

Suggested Citation

Ahn, Hie Joo and Hamilton, James D., Measuring Labor-Force Participation and the Incidence and Duration of Unemployment (2019-05-17). FEDS Working Paper No. 2019-035. Available at SSRN: https://ssrn.com/abstract=3417739 or http://dx.doi.org/10.17016/FEDS.2019.035

Hie Joo Ahn (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

James D. Hamilton

University of California at San Diego ( email )

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Mail code: 0508
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United States
619-534-5986 (Phone)
619-534-7040 (Fax)

National Bureau of Economic Research (NBER)

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