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Zooming the Ins and Outs of the U.S. Unemployment with a Wavelet Lens

Author

Listed:
  • Portugal, Pedro

    () (Banco de Portugal)

  • Rua, António

    () (Banco de Portugal)

Abstract

To better understand unemployment dynamics it is key to assess the role played by job creation and job destruction. Although the U.S. case has been studied extensively, the importance of job finding and employment exit rates to unemployment variability remains unsettled. The aim of this paper is to contribute to this debate by adopting a novel lens, wavelet analysis. We resort to wavelet analysis to unveil time- and frequency-varying features regarding the contribution of the job finding and job separation rates for the U.S. unemployment rate dynamics. Drawing on this approach, we are able to reconcile some apparently contradictory findings reported in previous literature. We find that the job finding rate is more influential for the overall unemployment behavior but the job separation rate also plays a critical role, especially during recessions.

Suggested Citation

  • Portugal, Pedro & Rua, António, 2018. "Zooming the Ins and Outs of the U.S. Unemployment with a Wavelet Lens," IZA Discussion Papers 11559, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp11559
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    More about this item

    Keywords

    worker flows; job separation rate; job finding rate; wavelets;

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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