Searching hard or hardly searching: How should we measure unemployment?

Author: Zachary Hayward

Unemployment can be measured in different ways depending on how we classify job search and readiness. Using
alternative definitions of unemployment we find:

  • Including those who search passively leads to a 1.25 ppt increase in the reported unemployment rate.
  • Young workers are most significantly affected by these changes, increasing the observed unemployment rate by
    approximately 2 percentage points.
  • This does not affect our view of the economic cycle – as the proportion of individuals passively searching is
    relatively similar through time.

Overall, the current measure of unemployment may hide some details about the level of unemployment but broader
measures that include passive searchers do not appear to be better indicators of the economic cycle.

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