Liveblogging World War II: June 21, 1942
Does This Look Like the Output of a Low-Order ARIMA System to You?

The Changing Mean Reversion of Unemployment in the United States

Microsoft Excel 2

Back in 1948-1980, you could expect 47% of a rise in the unemployment rate to be recaptured within a year: if unemployment went up by 1% point, you could expect the economy to suffer 2.12% point-years of cumulative unemployment as a result. Between 1980 and 1996 that coefficient dropped from 47% to 30%: in that period if unemployment went up by 1% point, you could expect the economy to suffer 3.33% point-years of cumulative unemployment as a result. Since 1996 the unemployment-rate mean-reversion coefficient has been only 12%: now if unemployment goes up by 1% point, you expect the economy to suffer 8.33% point-years of cumulative unemployment as a result.

This is an astonishing and stunning difference--albeit one that is just at the edge of statistical significance. And I have not seen an explanation of it nailed down...

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