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Unemployment Risk

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  • MICHAEL T. KILEY

Abstract

Fluctuations in the risk of a large increase in unemployment are examined. The analysis compares medium‐term risks—that is, risks at a 3‐year horizon—to those over a 1‐year horizon. The primary approach involves quantile regressions. Robustness exercises examine risks using a logistic regression to model the probability of a large increase in the unemployment rate. U.S. experience reveals an elevated risk of large increases in unemployment over the medium term when credit growth is high and when the unemployment rate is low. Near‐term risks to unemployment are closely tied to changes in corporate bond spreads or the slope of the yield curve, consistent with research on recession prediction, but these factors do not play a sizable role in medium‐term risks. These results highlight the value of considering different near‐ and medium‐term risk factors.

Suggested Citation

  • Michael T. Kiley, 2022. "Unemployment Risk," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 54(5), pages 1407-1424, August.
    • Handle: RePEc:wly:jmoncb:v:54:y:2022:i:5:p:1407-1424
    DOI: 10.1111/jmcb.12888
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    References listed on IDEAS

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    Cited by:

    1. Dave Reifschneider & William Wascher & David Wilcox, 2015. "Aggregate Supply in the United States: Recent Developments and Implications for the Conduct of Monetary Policy," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 63(1), pages 71-109, May.
    2. Todd E. Clark & Florian Huber & Gary Koop & Massimiliano Marcellino & Michael Pfarrhofer, 2023. "Tail Forecasting With Multivariate Bayesian Additive Regression Trees," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 64(3), pages 979-1022, August.

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    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E66 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General Outlook and Conditions

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