Abstract
During the recent recession and the continuing recovery, the national unemployment rate has maintained a level that has only been observed one other time since the Great Depression. While the initial causes of the increased unemployment rate are documented, the adjustment process and reduction of unemployment rates back toward some natural rate has not been addressed empirically. In this paper, the authors analyze labor supply side factors that may cause unemployment rates to remain high for a longer period than the typical recession. The authors focus on the impact of unemployment insurance extensions, housing market contractions and the general breadth of the economic downturn as factors that slow the labor supply adjustment process and lead to prolonged high rates of unemployment.
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Notes
Some states with unemployment rates of 8.5 percent or more have received a UI benefits extension of 65 weeks. While most states allow UI to transfer, it is not always an easy process for the recipient.
Abraham and Shimer (2002)
Table 7, Monthly Labor Review, November 2011.
See Peltzman (1976) for a review of the Voter Model.
Transfer payments, such as UI, have a presumed multiplier range of 2.2 - 0.8, while exogenous changes in taxes have a lower impact on GDP. Estimates are supplied by the Congressional Budget Office
Some states offer additional funds per dependent which could increase the value over 50 percent. Also, UI benefits are transferable across state lines, but most seekers do not move until they obtain employment.
Source of information RealityTrac
National Association of Realtors 2009
Ibid 3
National Association of Realtors 2008 Conference and Expo
U.S. Census Bureau, “Geographical Mobility: 2007 to 2008, Detailed Tables
Kaplan and Schulhofer-Wohl (2010) provide convincing evidence that this trend may be due to Census imputation.
See Azariadis (1976)
Monthly Labor Review, BLS, July 2010 http://www.bls.gov/opub/mlr/2010/07/mlr201007.pdf
H.R. 5749, Introduced April 9, 2008 by Representative Jim McDermitt (D) Washington
Rampell (2011)
For construction and theoretical justification of this variable see Keil and Pantuosco (1998).
For more information of the conventional mortgage home price index (CMHPI) see Stevens et al. (1995).
The fixed effect coefficients are not shown in the tables in order to save space. These results are available by request from the authors.
While we acknowledge that weak endogeneity may be an issue in our analysis, we believe that the inclusion of state and time fixed effects greatly reduces this issue. Many factors that impact unemployment rates and payment rates are consistent across state and/or time. For example, North Dakota has consistently lower unemployment rates than many other states because of their rich natural resource base. This impact would be included in the fixed effect for North Dakota and falls out of the analysis. In the same vein, the year 2007 was bad for all states, as the country fell into the beginning of the recession. The impact of 2007 is included in the year fixed effect and falls out of the analysis. What remains is an analysis of the variation across place and time.
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