Scandinavian Working Papers in Economics

Working Papers,
National Institute of Economic Research

No 120: Labor-Force Participation Rates and the Informational Value of Unemployment Rates: Evidence from Disaggregated US Data

Magnus Gustavsson () and Pär Österholm ()
Additional contact information
Magnus Gustavsson: Department of Economics, Uppsala University, Postal: Department of Economics, Uppsala University, Box 513, 751 20 Uppsala, Sweden
Pär Österholm: National Institute of Economic Research, Postal: National Institute of Economic Research, P.O. Box 3116, SE-103 62 Stockholm, Sweden

Abstract: The informational value of the aggregate US unemployment rate has recently been questioned be-cause of a unit root in the labor-force participation rate; the lack of mean reversion implies that long-run changes in unemployment rates are highly unlikely to reflect long-run changes in jobless-ness. This paper shows that this critique also extends to unemployment rates for sub-populations, such as prime-aged males.

Keywords: Unit-root test

JEL-codes: C22; E24; J21

18 pages, September 2010

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