Measuring the Duration of Unemployment Spells

Abstract

An understanding of the duration of unemployment spells is important for at least two reasons. First, the length of time spent unemployed has a direct bearing on individual welfare. Few people would feel so threatened by unemployment if they were certain it would only last a few weeks. Second, changes in the duration of unemployment spells are an important influence on the aggregate unemployment rate. The persistence of high unemployment after a recession and well into recovery and expansion is a puzzle to many, one that requires an appreciation of changes in the incidence and duration of unemployment if it is to be solved. The research summarized in this paper derives a measure of the complete length of unemployment spells in Canada, and analyzes how it changes over the business cycle. The cyclical movement of the average complete duration of unemployment contrasts sharply with that of the average incomplete duration which is regularly published by Statistics Canada. The first section of the paper discusses these differences by highlighting aggregate developments during the last two recessions, while the second section outlines the methodology used and some of the results of comparing the experience during the recession of the early 1990s with that during the early 1980s.