Factors in Unemployment Dynamics

From a FEDS Note by Hie Joo Ahn and James Hamilton:

“The U.S. unemployment rate averaged 8.4% during the first five years of recovery from the Great Recession of 2007-2009, the weakest recovery on record (see Figure 1). But as the expansion continued, unemployment continued to decline and by 2018 reached the lowest levels in almost half a century. Why did unemployment remain so high for so long, and what factors contributed to the recent lows?”

“One of the most striking features of the length of time people stay unemployed is the heterogeneity across the experience of different people. Most people who become unemployed find a new job relatively quickly. Even during the Great Recession, of people who were newly unemployed in month t, on average only 64% were still unemployed in month + 1. By contrast, if someone has been unemployed for 4-6 months as of month t, on average since 1976, there was an 81% probability that they would still be unemployed in month + 1. The lowest the latter probability ever got in any month from 1976 to 2018 was 71%. In other words, the newly unemployed during the Great Recession had better success finding jobs than did the long-term unemployed during the strongest economic boom.”

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Posted by at 10:38 PM

Labels: Inclusive Growth


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