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Federal Reserve Bank of Philadelphia
Working Papers
Job flows, jobless recoveries, and the Great Moderation
R. Jason Faberman
Abstract

This paper uses new data on job creation and job destruction to find evidence of a link between the jobless recoveries of the last two recessions and the recent decline in aggregate volatility known as the Great Moderation. The author finds that the last two recessions are characterized by jobless recoveries that came about through contrasting margins of employment adjustment—a relatively slow decline in job destruction in 1991-92 and persistently low job creation in 2002-03. In manufacturing, he finds that these patterns followed a secular decline in the magnitude of job flows and an abrupt decline in their volatility. A structural VAR analysis suggests that these patterns are driven by a decline in the volatilities of the underlying structural shocks in addition to a shift in the response of job flows to these shocks. The shift in structural responses is broadly consistent with the change in job flow patterns observed during the jobless recoveries.


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R. Jason Faberman, Job flows, jobless recoveries, and the Great Moderation, Federal Reserve Bank of Philadelphia, Working Papers 08-11, 2008.
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Keywords: Job analysis ; Employment ; Unemployment
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