Hysteresis vs. natural rate of US unemployment

► We study US state unemployment rates allowing for cross-section dependence. ► The PANIC method is used to separate the common and idiosyncratic components. ► We implement a more powerful RMA-based unit root test for these components. ► Including the data from recent recession yields a nonstationary common component. ► Even when stationarity is supported, the bias-corrected half-life appears very long.