Duration structure of unemployment hazards and the trend unemployment rate

This paper develops a new method to estimate the trend unemployment rate in which the duration profile of unemployment hazards is taken into account. The duration pro-file is characterized by three time-varying elements-level, slope , and curvature . The model also recovers the duration component of trend unemployment rate and the trend mean duration of unemployment. The estimated trend unemployment rate declines by about 3 percentage points between 1980 and 2019. Its short-term duration component decreases, whereas the long-term component increases, resulting in a rise in the trend mean duration of unemployment. The opposite trends in duration components suggest falling frictional unemployment but rising structural unemployment. Published by Elsevier B.V.