State of Persistence: Unemployment Hysteresis in Ten U.S. States: Bootstrap Nonlinear Unit Root Tests in Regional Labor Markets

This study examines the extent to which the hypothesis of hysteresis holds across different U.S. states by analyzing unemployment data. Implementing advanced nonlinear unit root tests, in combination with bootstrap techniques, the analysis investigates whether temporary shocks—such as recessions or the COVID-19 pandemic—can result in permanent changes in unemployment and other labor market outcomes. Our results reveal mixed outcomes consistent with recent literature on the hysteresis hypothesis in the U.S. The LNV and Sollis tests generally support the natural rate hypothesis. In contrast, the KSS and Kruse tests provide evidence of permanent effects in several states.