unemployment rates


This paper documents and attempts to explain the observed disparities
between unemployment rates computed from contemporaneous and retrospective CPS
data. The maintained hypothesis is that the discrepancies are consistent with
different definitions of unemployment between the two measures. The longitudinal
nature of the CPS, which allows a respondent's answers to be matched between one
year and the next, is exploited to examine two commonly expressed shortcomings
in the contemporaneous definition. I find that relative to the retrospective
measure, more workers with weak labor force attachment are considered unemployed
in the contemporaneous rate. In addition, discouraged workers, who are
classified as out of the labor force according to the contemporaneous definition,
may be counted as unemployed in the retrospective.

Year of Publication
Date Published
Publication Language
Citation Key
Levine, P. (1990). Contemporaneous vs. Retrospective Unemployment: Through the Filter of Memory or the Muddle of the Current Population Survey?. Retrieved from http://arks.princeton.edu/ark:/88435/dsp016395w709f (Original work published October 1990)
Working Papers

Throughout the post—war period, U.S. and Canadian unemployment rates
moved in tandem, but this historical link apparently ended in 1982.
During the past three years, Canadian unemployment rates have been some
three percentage points higher than their U.S. analogues, and this gap
shows no sign of diminishing. This paper is an empirical evaluation of
a variety of explanations for this new unemployment gap.
We first show that the demographic and industrial composition of
the two countries is remarkably similar, so that no simple mechanical
hypothesis explain the basic puzzle. It is also evident that the
increase in Canadian unemployment relative to U.S. unemployment cannot
be fully attributed to output movements. We find that the gap between
actual and predicted Canadian output, based on U.S. output, has fallen
dramatically since 1982 while the unemployment gap has widened. We also
find that unemployment in Canada was 2 to 3 percentage points higher in
1983 and 1984 than predicted by Canadian output.
We have investigated a variety of hypotheses to explain the slow
growth of employment in Canada after 1982. These hypotheses attribute
the slow growth of employment to rigidities in the labor market that
raise employers’ costs and restrict the flow of workers between
sectors. The evidence does not support the notion that the growth in
relative unemployment in Canada is due to differences in the regulation
of the labor market in the two countries. Minimum wage laws and
unemployment benefits are fairly similar in Canada and the U.S., and
neither has changed relative to the other in the last decade.
Unionization rates have increased in Canada relative to U.S. since
1970. Most of this divergence occurred before 1980, however, and does
not seem to have created an unemployment gap prior to 1980. Finally,
the hypothesis that differential real wage rates are a major determinant
of relative employment in the U.S. and Canada is soundly rejected by the
data. Real wage rates have been essentially uncorrelated with employ-
ment movements within each country and between the two countries.

Year of Publication
Date Published
Publication Language
Citation Key
Economica, 53 Special Issue July 1986 S171 - S195
Ashenfelter, O., & Card, D. (1986). Why Have Unemployment Rates in Canada and the U.S. Diverged?. Retrieved from http://arks.princeton.edu/ark:/88435/dsp01bn999673s (Original work published February 1986)
Working Papers

This paper presents some extremely flexible
identities useful in analyzing changes in unemploy-
ment rates from month to month, from year to year,
and over longer periods. An aggregate unemployment
rate change is expressed as a polynomial in labor
force stocks and first differences in labor force
stocks. Terms of this polynomial are interpreted
as the effects of (1) changes in the distribution
of the labor force among demographic groups; (2)
unexpected changes in labor demand within a demo-
graphic group; and (3) unexpected changes in labor
supply within a demographic group. A simple exten-
sion of the framework shows its relationship to
recent work with labor force gross flow data. The
framework is applied to the increase in black youth
unemployment between 1950 and 1970. Most of it may
be attributed to a decline in employment among male
in the South.

Year of Publication
Date Published
Publication Language
Citation Key
Cave, G. (1985). Difference Identities for Unemployment Rates. Retrieved from http://arks.princeton.edu/ark:/88435/dsp01t435gc983 (Original work published February 1985)
Working Papers