Monday, April 25, 2011

Explaining the recent decline in the unemployment rate

This article speaks as to if things are getting better or worse for working Americas.  The conclusion is more akin that things are no longer getting worse.

Explaining the recent decline in the unemployment rate

by Lisa Barrow, senior economist Federal Reserve Bank of Chicago


The unemployment rate fell by nearly 1 percentage point between November 2010 and March 2011. Was this drop due to unemployed workers exhausting their unemployment insurance (UI) benefits and choosing to stop looking for work or due to more positive labor market developments, such as fewer workers losing their jobs or more workers finding new jobs?

Conclusion
The recent sizable drop in the unemployment rate seems to be have been largely driven by the decline in the LFS [Labor Force Status]  flow from employment to unemployment

In this Chicago Fed Letter, I [Lisa Barrow] examine the data on labor force status (LFS) flows from the U.S. Bureau of Labor Statistics’ Current Population Survey (CPS) to assess their contributions to the recent decline in the unemployment rate. I conclude that this decline seems to have been driven by a decline in the number of employed persons becoming unemployed rather than by either an increase in the unemployed becoming employed or an increase in the unemployed leaving the labor force.

The entire study is available at:  http://www.chicagofed.org/digital_assets/publications/chicago_fed_letter/2011/cfljune2011_287.pdf

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