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Media type:
E-Article
Title:
Recessions and the Trend in the US Unemployment Rate
Contributor:
Lunsford, Kurt G.
Published:
Federal Reserve Bank of Cleveland, 2021
Published in:
Economic Commentary (Federal Reserve Bank of Cleveland) (2021), Seite 1-8
Language:
English
DOI:
10.26509/frbc-ec-202101
ISSN:
0428-1276;
2163-3738
Origination:
Footnote:
Description:
The unemployment rate in the United States falls slowly in expansions, and it may not reach its previous low point before the next recession begins. Based on this feature, I document that the frequent recessions prior to 1983 are associated with an upward trend in the unemployment rate. In contrast, the long expansions beginning in 1983 are associated with a downward trend. I then estimate a two-variable vector autoregression (VAR) that includes the unemployment rate and a recession indicator. Long-horizon forecasts from this VAR conditioned on no future recessions project that the unemployment rate will go to 3.6 percent after a long period with no recessions.