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Measuring Labor-Force Participation and the Incidence and Duration of Unemployment

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  • Hie Joo Ahn

    (Board of Governors)

  • James Hamilton

    (University of California San Diego)

Abstract

The underlying data from which the U.S. unemployment rate, labor-force participation rate, and duration of unemployment are calculated contain numerous internal contradictions. This paper catalogs these inconsistencies and proposes a unified reconciliation. We find that the usual statistics understate the unemployment rate and the labor-force participation rate by about two percentage points on average and that the bias in the latter has increased over time. The BLS estimate of the average duration of unemployment substantially overstates the true duration of uninterrupted spells of unemployment and misrepresents what happened to average durations during the Great Recession and its recovery. (Copyright: Elsevier)

Suggested Citation

  • Hie Joo Ahn & James Hamilton, 2022. "Measuring Labor-Force Participation and the Incidence and Duration of Unemployment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 44, pages 1-32, April.
    • Handle: RePEc:red:issued:20-490
    DOI: 10.1016/j.red.2021.04.005
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    Citations

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    Cited by:

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    2. Ward, Jason M. & Anne Edwards, Kathryn, 2021. "CPS Nonresponse During the COVID-19 Pandemic: Explanations, Extent, and Effects," Labour Economics, Elsevier, vol. 72(C).
    3. Chodorow-Reich, Gabriel & Coglianese, John, 2021. "Projecting unemployment durations: A factor-flows simulation approach with application to the COVID-19 recession," Journal of Public Economics, Elsevier, vol. 197(C).
    4. Ahn, Hie Joo, 2023. "Duration structure of unemployment hazards and the trend unemployment rate," Journal of Economic Dynamics and Control, Elsevier, vol. 151(C).
    5. Jessica Gallant & Kory Kroft & Fabian Lange & Matthew J. Notowidigdo, 2020. "Temporary Unemployment and Labor Market Dynamics during the COVID-19 Recession," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 51(3 (Fall)), pages 167-226.
    6. Amalia Kouskoura & Eleni Kalliontzi & Dimitris Skalkos & Ioannis Bakouros, 2024. "Evaluating Experts’ Perceptions on Regional Competitiveness Based on the Ten Key Factors of Assessment," Sustainability, MDPI, vol. 16(14), pages 1-16, July.
    7. Bernhardt, Robert & Munro, David & Wolcott, Erin, 2021. "How Does the Dramatic Rise of CPS Non-Response Impact Labor Market Indicators?," GLO Discussion Paper Series 781, Global Labor Organization (GLO).
    8. Alexander Bick & Adam Blandin, 2020. "The Labor Market Impact of a Pandemic: Validation and Application of a Do-It-Yourself CPS," Working Papers 2031, Federal Reserve Bank of Dallas.
    9. David H. Bernstein & Andrew B. Martinez, 2021. "Jointly Modeling Male and Female Labor Participation and Unemployment," Econometrics, MDPI, vol. 9(4), pages 1-14, December.
    10. Gerald D. Cohen, 2020. "Measuring employment during COVID-19: challenges and opportunities," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 55(4), pages 229-239, October.
    11. Li, Teng & Barwick, Panle Jia & Deng, Yongheng & Huang, Xinfei & Li, Shanjun, 2023. "The COVID-19 pandemic and unemployment: Evidence from mobile phone data from China," Journal of Urban Economics, Elsevier, vol. 135(C).
    12. Sun, Jiandong & Feng, Shuaizhang & Hu, Yingyao, 2021. "Misclassification errors in labor force statuses and the early identification of economic recessions," Journal of Asian Economics, Elsevier, vol. 75(C).
    13. Katarzyna Saczuk & Olga Zajkowska, 2024. "Measuring labour force participation during pandemics and methodological changes," NBP Working Papers 372, Narodowy Bank Polski.

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    More about this item

    Keywords

    unemployment rate; labor-force participation rate; unemployment duration; measurement error;
    All these keywords.

    JEL classification:

    • 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
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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