IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_7941.html
   My bibliography  Save this paper

Estimating Labor Market Slack, U.S. 1994-2019

Author

Listed:
  • John Komlos

Abstract

U3, the official unemployment rate, is an inadequate gauge of labor-market slack and the extent to which it misinforms varies substantially over the business cycle. The U6 unemployment rate is usually about 4 percentage points above U3. However, during the Great Recession it exceeded U3 by 7 percentage points for three years. Moreover, the U6-U3 gap is magnified among disadvantaged groups such as minorities, youth, and for the less educated. For instance, in January 2011 the U6-U3 gap among African American youth was 17.9 pps as U6 climbed to 47.5% and was similarly large among African Americans without a high-school diploma.

Suggested Citation

  • John Komlos, 2019. "Estimating Labor Market Slack, U.S. 1994-2019," CESifo Working Paper Series 7941, CESifo.
    • Handle: RePEc:ces:ceswps:_7941
    as

    Download full text from publisher

    File URL: https://www.cesifo.org/DocDL/cesifo1_wp7941.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Shuaizhang Feng & Yingyao Hu, 2013. "Misclassification Errors and the Underestimation of the US Unemployment Rate," American Economic Review, American Economic Association, vol. 103(2), pages 1054-1070, April.
    2. Dickens, William T & Lang, Kevin, 1988. "The Reemergence of Segmented Labor Market Theory," American Economic Review, American Economic Association, vol. 78(2), pages 129-134, May.
    3. Mortensen, Dale & Pissarides, Christopher, 2011. "Job Creation and Job Destruction in the Theory of Unemployment," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 1-19.
    4. Fontanari, Claudia & Palumbo, Antonella & Salvatori, Chiara, 2020. "Potential Output in Theory and Practice: A Revision and Update of Okun's Original Method," Structural Change and Economic Dynamics, Elsevier, vol. 54(C), pages 247-266.
    5. Eric Rosengren, 2014. "Labor market slack and monetary policy," Speech 82, Federal Reserve Bank of Boston.
    6. Clifford F. Thies, 2017. "Slip and Drift in Labor Statistics Since 2007," Econ Journal Watch, Econ Journal Watch, vol. 14(1), pages 121–132-1, January.
    7. Nick Buffie, 2015. "The Anomaly of U-3: Why the Unemployment Rate is Overstating the Strength of Today’s Labor Market," CEPR Reports and Issue Briefs 2015-24, Center for Economic and Policy Research (CEPR).
    8. Amrita Chhachhi & Guy Standing, 2014. "Understanding the Precariat through Labour and Work," Development and Change, International Institute of Social Studies, vol. 45(5), pages 963-980, September.
    9. Diamond, Peter A, 1981. "Mobility Costs, Frictional Unemployment, and Efficiency," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 798-812, August.
    10. Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June.
    11. Saul, S., 1992. "An Illfare Approach to the Measurement of Unemployment," Papers e9204, Western Sydney - School of Business And Technology.
    12. Ian M. McDonald & Robert M. Solow, 1985. "Wages and Employment in a Segmented Labor Market," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(4), pages 1115-1141.
    13. Crain, Marion & Sherraden, Michael, 2014. "Working and Living in the Shadow of Economic Fragility," OUP Catalogue, Oxford University Press, number 9780199988488.
    14. Bulow, Jeremy I & Summers, Lawrence H, 1986. "A Theory of Dual Labor Markets with Application to Industrial Policy,Discrimination, and Keynesian Unemployment," Journal of Labor Economics, University of Chicago Press, vol. 4(3), pages 376-414, July.
    15. William Darity, 2010. "A Direct Route to Full Employment," The Review of Black Political Economy, Springer;National Economic Association, vol. 37(3), pages 179-181, September.
    16. Feng, Shuaizhang & Hu, Yingyao & Sun, Jiandong, 2018. "On the robustness of alternative unemployment measures," Economics Letters, Elsevier, vol. 166(C), pages 1-5.
    17. Mortensen, Dale T, 1970. "Job Search, the Duration of Unemployment, and the Phillips Curve," American Economic Review, American Economic Association, vol. 60(5), pages 847-862, December.
    18. Christina Beatty & Stephen Fothergill, 2002. "Hidden Unemployment Among Men: A Case Study," Regional Studies, Taylor & Francis Journals, vol. 36(8), pages 811-823.
    19. Gerald Friedman, 2014. "Workers without employers: shadow corporations and the rise of the gig economy," Review of Keynesian Economics, Edward Elgar Publishing, vol. 2(2), pages 171-188, April.
    20. Andrea Brandolini & Eliana Viviano, 2016. "Behind and beyond the (head count) employment rate," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 179(3), pages 657-681, June.
    21. Pavlina R. Tcherneva, 2019. "The Federal Job Guarantee: Prevention, Not Just a Cure," Challenge, Taylor & Francis Journals, vol. 62(4), pages 253-272, July.
    22. Peter A. Diamond, 1982. "Wage Determination and Efficiency in Search Equilibrium," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 49(2), pages 217-227.
    23. William Darity & Darrick Hamilton, 2012. "Bold Policies for Economic Justice," The Review of Black Political Economy, Springer;National Economic Association, vol. 39(1), pages 79-85, March.
    24. William A. Darity & Patrick L. Mason, 1998. "Evidence on Discrimination in Employment: Codes of Color, Codes of Gender," Journal of Economic Perspectives, American Economic Association, vol. 12(2), pages 63-90, Spring.
    25. William Darity & Darrick Hamilton & James Stewart, 2015. "A Tour de Force in Understanding Intergroup Inequality: An Introduction to Stratification Economics," The Review of Black Political Economy, Springer;National Economic Association, vol. 42(1), pages 1-6, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. John Komlos, 2019. "The Real U.S. Unemployment Rate Is Twice the Official Rate, and the Phillips Curve," CESifo Working Paper Series 7859, CESifo.
    2. Morvay, Endre, 2012. "Munkapiac keresési súrlódásokkal [Job-seeking on the labour market, with frictions]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(2), pages 139-163.
    3. Chantal Cases, 1994. "Durées de chômage et comportements d'offre de travail : une revue de la littérature," Économie et Prévision, Programme National Persée, vol. 113(2), pages 155-170.
    4. Fernando Martins & Domingos Seward, 2019. "Into the heterogeneities in the Portuguese labour market: an empirical assessment," Working Papers w201908, Banco de Portugal, Economics and Research Department.
    5. Peter Diamond, 2011. "Unemployment, Vacancies, Wages," American Economic Review, American Economic Association, vol. 101(4), pages 1045-1072, June.
    6. Matteo Richiardi, 2006. "Toward a Non-Equilibrium Unemployment Theory," Computational Economics, Springer;Society for Computational Economics, vol. 27(1), pages 135-160, February.
    7. Ken Burdett & Randall Wright, 1998. "Two-Sided Search with Nontransferable Utility," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(1), pages 220-245, January.
    8. repec:eee:labchp:v:2:y:1986:i:c:p:849-919 is not listed on IDEAS
    9. repec:eee:labchp:v:3:y:1999:i:pb:p:2567-2627 is not listed on IDEAS
    10. Richard Rogerson & Robert Shimer & Randall Wright, 2004. "Search-Theoretic Models of the Labor Market-A Survey," NBER Working Papers 10655, National Bureau of Economic Research, Inc.
    11. repec:zbw:ifwkwp:1309 is not listed on IDEAS
    12. Merkl, Christian & Snower, Dennis J., 2008. "Escaping the unemployment trap: The case of East Germany," Journal of Comparative Economics, Elsevier, vol. 36(4), pages 542-556, December.
    13. Pissarides, Christopher & Mortensen, Dale T., 2001. "Taxes, Subsidies and Equilibrium Labour Market Outcomes," CEPR Discussion Papers 2989, C.E.P.R. Discussion Papers.
    14. Ingrid Kubin & Michael Steiner, 1991. "Labor Market Performance and Regional Types: A Conceptual Framework with Empirical Analysis of Austria," International Regional Science Review, , vol. 14(3), pages 275-298, December.
    15. Wu Joseph S. K. & Ho Chi Pui, 2017. "The Shapiro-Stiglitz Model with Non-constant Marginal Utility," Open Economics, De Gruyter, vol. 1(1), pages 36-48, August.
    16. Danthine, Samuel & De Vroey, Michel, 2017. "The Integration Of Search In Macroeconomics: Two Alternative Paths," Journal of the History of Economic Thought, Cambridge University Press, vol. 39(4), pages 523-548, December.
    17. Steinar Holden & Åsa Rosén, 2014. "Discrimination And Employment Protection," Journal of the European Economic Association, European Economic Association, vol. 12(6), pages 1676-1699, December.
    18. Stadler, Manfred, 1998. "Dual labor markets, unemployment and endogenous growth," Tübinger Diskussionsbeiträge 126, University of Tübingen, School of Business and Economics.
    19. Coral Río & Olga Alonso-Villar, 2018. "Segregation and Social Welfare: A Methodological Proposal with an Application to the U.S," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 137(1), pages 257-280, May.
    20. Mortensen, Dale T., 2011. "Autobiography," Nobel Prize in Economics documents 2010-5, Nobel Prize Committee.
    21. Tsasa, Jean-Paul K., 2022. "Labor market volatility in a fully specified RBC search model: An analytical investigation," Journal of Mathematical Economics, Elsevier, vol. 103(C).
    22. Dale T. Mortensen, 2011. "Markets with Search Friction and the DMP Model," American Economic Review, American Economic Association, vol. 101(4), pages 1073-1091, June.
    23. Pissarides, Christopher A., 2015. "Dale Mortensen: An appreciation," Research in Economics, Elsevier, vol. 69(1), pages 1-6.

    More about this item

    Keywords

    unemployment; U6; unemployment by ethnicity; discouraged workers; labor market slack;
    All these keywords.

    JEL classification:

    • J40 - Labor and Demographic Economics - - Particular Labor Markets - - - General
    • J49 - Labor and Demographic Economics - - Particular Labor Markets - - - Other
    • J69 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Other

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_7941. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Klaus Wohlrabe (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.