This study documents a substantial decline in employment volatility at business-cycle frequencies over the postwar period using state-industry level data. The distribution of total employment volatilities at the state level has become less disperse over time, and mean volatility has fallen. Similar results are obtained using employment data on one-digit sectors across states: all sectors have seen a decline in employment volatility over the postwar period, and state-sectors are more alike in terms of volatility levels. A key source of the decline in volatility appears to be widespread (across states and industries) decreases in the size of shocks hitting employment levels. Shifts in the demographic factors, and industrial structures of state economies have had little or no impact. Neither have inter-state employment shifts, such as migrations from the Frostbelt to the Sunbelt. The sources of the smaller employment shocks are unclear, although the evidence points to macroeconomic phenomena.
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Paper provided by Federal Reserve Bank of Philadelphia in its series Working Papers with number
02-14.
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Lawrence J. Christiano & Terry J. Fitzgerald, 1999.
"The Band Pass Filter,"
NBER Working Papers
7257, National Bureau of Economic Research, Inc.
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Lawrence J. Christiano & Terry J. Fitzgerald, 1999.
"The Band pass filter,"
Working Paper
9906, Federal Reserve Bank of Cleveland.
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Lawrence J. Christiano & Terry J. Fitzgerald, 2003.
"The Band Pass Filter,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(2), pages 435-465, 05.
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