Assignment on Impact of Unemployment in US Economy

Job Loss, Job Finding, and Unemployment in the U.S.

Economy over the Past Fifty Years €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.

Manchester Welcomes The Labour Party

Centre for Labour Economics June 1981

4.1: Labour Mobility

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.

€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/˜rehall11 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...