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

31 Pages Posted: 27 Nov 2019

See all articles by John Komlos

John Komlos

Ludwig Maximilian University of Munich (LMU) - Faculty of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: 2019

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.

Keywords: unemployment, U6, unemployment by ethnicity, discouraged workers, labor market slack

JEL Classification: J400, J490, J690

Suggested Citation

Komlos, John, Estimating Labor Market Slack, U.S. 1994-2019 (2019). CESifo Working Paper No. 7941, Available at SSRN: https://ssrn.com/abstract=3490405

John Komlos (Contact Author)

Ludwig Maximilian University of Munich (LMU) - Faculty of Economics ( email )

Ludwigstrasse 28
Munich, D-80539
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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