The Inexorable Recoveries of Unemployment
No TL;DR found
Abstract
IZA. on policy, IZA takes no institutional policy positions. The IZA research network is committed to the IZA Guiding Principles of Research Integrity. of our Our key to between academic policymakers ABSTRACT Unemployment recoveries in the US have been inexorable. Between 1948 and 2019, the annual reduction in the unemployment rate during cyclical recoveries was fairly tightly distributed around 0.1 log points per year. The economy seems to have an irresistible force toward restoring full employment. In the aftermath of a recession, unless another crisis intervenes, unemployment continues to glide down. Occasionally, unemployment rises rapidly during an economic crisis, while most of the time, unemployment declines slowly and smoothly at a near-constant proportional rate. We show that similar properties hold for other measures of the US unemployment rate and for the unemployment rates of many other emerging and advanced countries. year. We document this regularity within the two main statistical approaches to business-cycle analysis and measurement: (1) construction of a chronology of turning points, and (2) estimation of a Markov regime-switching model. We also show that measures of US unemployment extended to include discouraged workers and others, not counted in the labor force, display the same