The development of the unemployment rate: A long-term comparison between Germany and the United States

An empirical estimate of the trend and cyclical components of the unemployment rate clearly shows the deep crisis of the German labour market. The trend component is now higher than in 1950, and there is no indication that a rise of the trend has come to a standstill or that a trend change has occurred. If nothing serious changes, the model estimated in this article implies that the trend of the German unemployment rate will increase in the next four years by a further percentage point. Since the trend component reflects the structural causes of unemployment, measures to improve the employment situation must be applied here. A comparison with the development in the United States shows that a rise of the trend component of unemployment is not an unalterable fate.