Assessing labor market shocks in Italy using a robust Hodrick-Prescott filter with structural breaks

The Hodrick-Prescott filter is a popular macroeconomics tool to decompose time series into a smooth trend and a business cycle components. The last few years have witnessed global events, such as the Global Financial Crisis, the COVID-19 pandemic, and the war in Ukraine, that have had abrupt structural impacts on many economic time series. At the same time, governments in Western countries have been arranging structural reforms to adapt their labor markets to socio-economic changes. Among the countries at the center of these processes stands Italy. Accordingly, it is reasonable to assume that the combination of structural reforms and socioeconomic shocks have generated structural changes in the number of employed people within the country. We then employ a robust version of the Hodrick-Prescott filter to identify structural breaks in the quarterly time series of employed people in Italy for different age groups from 1993 to 2023.