Hysteresis Hypothesis in Job Creation and Destruction: Evidence from the U.S.

We employ the Im et al. (2005) and the Bai and Carrion-i-Silvestre (2009) tests of panel based unit root types to investigate the hysteresis hypothesis in job creation and destruction using U.S. state-level data. Although the conventional individual unit tests fail to reject the unit root for some of the states job creation and destruction rates, the results based on two panel-based unit root tests indicate that the hysteresis hypothesis in job creation and destruction can clearly be rejected. Our findings suggest that given sufficient time, the job creation and destruction rates will return to their previous paths.