Labor-Force Participation Rates and the Informational Value of Unemployment Rates in US: Evidence from Regional Data

Unemployment rate is an important social indicator for unhappiness. This paper explores the informational value of the United States unemployment rate via examining whether the labor-force participation rate is featured with non-stationary processes from the geographical location perspective. We apply the recently developed flexible Fourier stationarity test proposed by Enders and Lee (Oxf Bull Econ Stat 74:574–599 <CitationRef CitationID="CR12">2012</CitationRef>). Our main findings are: (1) when we apply conventional tests, such as the Augmented Dickey–Fuller (ADF), ADF-GLS and KPSS univariate tests, we find little evidence for stationarity; and (2) when we employ the flexible Fourier univariate test with consider of structural breaks, we find evidence of stationarity for 45 out of 51 states. Based on our results, we argue that the unemployment rate alone, without understanding participation behavior, does not provide an overall picture for the melancholy jobless people. Copyright Springer Science+Business Media Dordrecht 2014