Misclassification errors in labor force statuses and the early identification of economic recessions

Jiandong Sun, Shuaizhang Feng and Yingyao Hu

Journal of Asian Economics, 2021, vol. 75, issue C

Abstract: Accurate identification of economic recessions in a timely fashion is a major macroeconomic challenge. The so-called Sahm recession indicator (Sahm, 2019), one of the most reliable early detectors of the U.S. recessions, relies on changes in unemployment rates, and is thus subject to misclassification errors in labor force statuses based on survey data. We propose a novel misclassification-errors correction to improve the predictive timeliness and provide a proper threshold value. Using historical data, we show that the adjusted unemployment-based recession indicator offers earlier identification of economic recessions.

Keywords: Economic recession; Sahm rule; Misclassification errors; Unemployment rate (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:asieco:v:75:y:2021:i:c:s1049007821000488

DOI: 10.1016/j.asieco.2021.101319

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