Misclassification Errors and the Underestimation of the US Unemployment Rate

Using recent results in the measurement error literature, we show that the official US unemployment rate substantially underestimates the true level of unemployment, due to misclassification errors in the labor force status in the Current Population Survey. During the period from January 1996 to Aug...

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Published inThe American economic review Vol. 103; no. 2; pp. 1054 - 1070
Main Authors Feng, Shuaizhang, Hu, Yingyao
Format Journal Article
LanguageEnglish
Published Nashville American Economic Association 01.04.2013
Subjects
Academic disciplines
Business cycles
Demography
Economic conditions
Economic indicators
Economic surveys
Eigenvalues
Eigenvectors
Error rates
Interviews
Labor force
Labor force participation rates
Labor force surveys
Labour force
Labour market participation
Measurement
Measurement errors
Polls & surveys
Population statistics
Shorter Papers
Studies
U.S.A
Unemployment
Unemployment rates
Workforce
United States > US
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Summary:Using recent results in the measurement error literature, we show that the official US unemployment rate substantially underestimates the true level of unemployment, due to misclassification errors in the labor force status in the Current Population Survey. During the period from January 1996 to August 2011, the corrected monthly unemployment rates are between 1 and 4.4 percentage points (2.1 percentage points on average) higher than the official rates, and are more sensitive to changes in business cycles. The labor force participation rates, however, are not affected by this correction. [PUBLICATION ABSTRACT]
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
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ISSN:0002-8282
1944-7981
DOI:10.1257/aer.103.2.1054