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Mismeasurement in the Current Population Survey is worse than we realized -- and it's skewing our understanding of the labor market.
Remarkable paper from Hie Joo Ahn and James D. Hamilton.
papers.nber.org/conf_papers/f1…
Remarkable paper from Hie Joo Ahn and James D. Hamilton.
papers.nber.org/conf_papers/f1…
I'm going to leave it to the actual economists to walk through the technical details (I'm looking at you, @Claudia_Sahm), but this paper is important for all of us who follow the labor market and work with CPS data. So less technical thread to follow.
First, the blockbuster: Properly measured, the "true" unemployment rate could be 1.9 percentage points higher on average than the official estimate. And in the Great Recession, the gap was >2.5pp. 
