Why Has Unemployment Risen? Insights From Labor Force Flows

Abstract

[Excerpt] Several economic indicators have shown that the labor market weakened from May 2007 to May 2008. The number of unemployed persons rose from 6.9 million to 8.5 million, and the jobless rate increased from 4.5 to 5.5 percent. Intuitively, a rise in unemployment might be expected to coincide with a decline in employment. However, total employment, as measured by the Current Population Survey (CPS), was little changed over this period. Recently released experimental data series on the flows of people between different labor force statuses help explain how unemployment increased.