Estimating Unemployed Entrants into the Labor Force

Abstract

This paper examines the methodology currently used by the Bureau of Labor Statistics to estimate unemployed entrants into the labor force. Unemployed entrants are individuals who enter the labor force for the first time, or after an absence of a year or more. Since these individuals lack current work experience, they are not eligible to receive unemployment compensation and therefore are not accounted for in the Unemployment Insurance system. According to the national Current Population Survey, unemployed entrants make up approximately 40 percent of the total unemployed. The estimation of unemployed entrants is a crucial step in the development of unemployment estimates at the labor market level. This paper demonstrates that the current method in use does not produce realistic estimates. Inconsistencies in the methodology are discussed and an econometric model is presented that produces more accurate measurements of the number of unemployed entrants into the labor force.