Working Paper

Quits, Layoffs, and Labor Supply

Abstract: We develop a time series of quits and layoffs using the Current Population Survey, and analyze their relationship with labor supply decisions over the business cycle. Our findings challenge the assumption that most labor force exits from employment are voluntary quits. Instead, we show that 40% of these exits are precipitated by layoffs. With this distinction, we find both quits to non-participation and the share of workers exiting after a layoff falls during recessions. A workhorse search model is used to frame how these facts add nuance to our understanding of business cycles. Additional results explore regularities of these patterns in the cross section of workers, in the COVID-19 recovery, and in comparison to the JOLTS series on quits and layoffs.

Keywords: Labor supply; Quits; Business cycles; Layoffs;

JEL Classification: E32; J21; E24;

https://doi.org/10.21034/iwp.94

Bibliographic Information

Provider: Federal Reserve Bank of Minneapolis

Part of Series: Opportunity and Inclusive Growth Institute Working Papers

Publication Date: 2024-07-18

Number: 094