PS+Data+Unemployment+and+Participation+Rates

A number of political controversies surround various measures of employment activity. One is that unemployment rates will increase as labor force participation rates increase. Another is that as women entered the work force they replaced men. That is, as the Female Labor Force Participation Rate increased, the Male Labor Force Participation Rate decreased.

Go to http://research.stlouisfed.org/fred2/ and retrieve:
1. Civilian Labor Force Participation Rate (CIVPART), Percent, Quarterly, Seasonally Adjusted, since 1949
2. Civilian Labor Force (CLF16OV), Thousands of Persons, Quarterly, Seasonally Adjusted, since 1949
3. Labor Force Participation Rate - Women (LNS11300002), Percent, Quarterly, Seasonally Adjusted, since 1949
4. Labor Force Participation Rate - Men (LNS11300001), Percent, Quarterly, Seasonally Adjusted, since 1949
5. Civilian Unemployment Rate (UNRATE), Percent, Quarterly, Seasonally Adjusted, since 1949
6. Natural Rate of Unemployment (Short-Term) (NROUST), Percent, Quarterly, Not Seasonally Adjusted, since 1949

1. (10 pts.) Create a chart with Labor Force Participation Rate (LFPR) on one vertical axis and both the Actual (UnRate) and Natural (Nat’l UnRate) Rates of unemployment on the other vertical axis.

2. (10 pts.) To check for the relationship between the LFPR and UnRate use a regression on changes: ∆UnRate =  + *∆LFPR.
a. (5 pts.) What is the best estimate of  (to 4 decimals)?

 =

b. (5 pts.) What is the best estimate of b (to 4 decimals)?

 =

c. (5 pts.) What share of variation in ∆UnRate is explained by ∆LFPR (to 2 decimals)?

adj. R2 =

3. (10 pts.) Provide a graph of this relationship with a “line of best fit” clearly and accurately placed on the graph.

4. (10 pts.) Based on the data does a higher LFPR imply a higher UnRate? Explain.

5. (10 pts.) Create a chart with overall, female and