Job Loss, Job Finding, and Unemployment in the U.S.
Economy over the Past Fifty Years Ã¢ÂÂ¬KRISHNA YADAVIILM INSTITUTE FOR HIGHER EDUCATION, GURGAON, HARYANAASSIGNMENT ON IMPACT OF UNEMPLOYEMENT IN THE US ECONOMY.
September 15, 2005AbstractNew data compel a new view of events in the labor market during a recession.
Unemployment rises almost entirely because jobs become harder to find. Recessionsinvolve little increase in the flow of workers out of jobs. Another important findingfrom new data is that a large fraction of workers departing jobs move to new jobs withoutintervening unemployment. I develop estimates of separation rates and job-findingrates for the past 50 years, using historical data informed by detailed recent data. Theseparation rate is nearly constant while the job-finding rate shows high volatility atbusiness-cycle and lower frequencies. I review modern theories of fluctuations in thejob-finding rate. The challenge to these theories is to identify mechanisms in the labormarket that amplify small changes in driving forces into fluctuations in the job-findingrate of the high magnitude actually observed.
In the standard theory developed overthe past two decades, the wage moves to offset driving forces and the predicted magnitudeof changes in the job-finding rate is tiny. New models overcome this property byinvoking a new form of sticky wages or by introducing information and other frictionsinto the employment relationship.
Ã¢ÂÂ¬Presented to the NBER Macro Annual Conference, April 2005. This research is part of the program onEconomic Fluctuations and Growth of the NBER. I thank the editors and discussants, Narayana Kocherlakota,Michael Krause, Thomas Lubik, Robert Shimer, and Frank Wolak for comments, suggestions, and data. Afile containing data and programs is available at Stanford.edu/ÃÂrehall11 IntroductionThe turnover view of unemployment has a firm grip on modern thinking about joblessnessin the United States. Unemployment occurs when a worker departs from a job and spendstime finding a new...