Does Unemployment Hysteresis Equal Employment Hysteresis?*

This paper investigates if conclusions regarding labour market hysteresis differ depending on whether employment or unemployment rates are studied. Applying a range of unit‐root tests to monthly data from Australia, Austria, Canada, Finland, Sweden, the UK and the USA, we find results for employment rates that contrast those based on unemployment rates. In particular, rather than the mixed evidence for hysteresis found using unemployment rates, employment rates result in unequivocal evidence of hysteresis in Australia, Canada and the USA. These findings cast doubt on previous conclusions in the literature.