Discussion Paper

Expecting the Unexpected: Job Losses and Household Spending


Abstract: Unemployment risk constitutes one of the most significant sources of uncertainty facing workers in the United States. A large body of work has carefully documented that job loss may have long-term effects on one’s career, depressing earnings by as much as 20 percent after fifteen to twenty years. Given the severity of a job loss for earnings, an important question is how much such an event affects one’s standard of living during a spell of unemployment. This blog post explores how unemployment and expectations of job loss interact to affect household spending.

Keywords: expectations; unemployment; labor market risk; spending;

JEL Classification: E2;

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Bibliographic Information

Provider: Federal Reserve Bank of New York

Part of Series: Liberty Street Economics

Publication Date: 2019-03-27

Number: 20190327