Explaining cyclical movements in employment: creative destruction or changes in utilization
An important step in understanding why employment fluctuates cyclically is determining the relative importance of cyclical movements in permanent and temporary plant-level employment changes. If movements in permanent employment changes are important, then recessions are times when the destruction of job specific capital picks up and/or investment in new job capital slows. If movements in temporary employment changes are important, then employment fluctuations are related to the temporary movement of workers across activities (e.g., from work to home production or search and back again) as ...
The Labor Share of Income and Equilibrium Unemployment
After rising to 10 percent in the wake of the Great Recession, the unemployment rate is now approaching a level that many observers--including the Congressional Budget Office, as shown in Figure 1--associate with the natural rate of unemployment.
The effect of restructuring on unemployment
This paper finds that the permanent job losses associated with industrial restructuring have significantly boosted the variance of unemployment, causing it to rise much higher in recessions than it would have without cyclically correlated restructuring. Moreover, the influence of restructuring has increased noticeably in the 1980s and 1990s, acting to increase economic instability at a time when other factors were operating to reduce it.
How biased are measures of cyclical movements in productivity and hours?
The movement of hours worked over the business cycle is an important input into the estimation of many key parameters in macroeconomics. Unfortunately, the available data on hours do not correspond precisely to the concept required for accurate inference. We study one source of mismeasurement--that the most commonly used source data measure hours paid instead of hours worked--focusing our attention on salaried workers, a group for whom the gap between hours paid and hours worked is likely particularly large. We show that the measurement gap varies significantly and positively with changes in ...
What drives matching efficiency? a tale of composition and dispersion
This paper presents a framework to study movements in the matching efficiency of the labor market and highlights two observable factors affecting matching efficiency: (i) unemployment composition and (ii) dispersion in labor market conditions, the fact that tight labor markets coexist with slack ones. Using CPS micro data over 1976-2009, we find that composition is responsible for most of the movements in matching efficiency until 2006. In 2008-2009, only forty percent of an exceptionally low matching efficiency can be attributed to composition. New highly disaggregated data on vacancies and ...
Workweek flexibility and hours variation
I use the term workweek flexibility to describe the ease of changing output by altering the number of hours per worker. Despite the fact that workweek flexibility is potentially important for understanding the cyclical behavior of marginal cost and prices, as well as cyclical movements in hours and output, it has received little attention. Using insights from a simple model of employment and the workweek, I use mean workweek levels to identify the effect of workweek flexibility and then show that it is an important determinant of firms' marginal cost schedules and the variance of industry ...
Is reallocation related to the cycle? A look at permanent and temporary job flows
How much of aggregate employment fluctuations is due to plants destroying and then recreating the same jobs over the cycle and how much is due to some plants permanently destroying jobs in a recession and other plants permanently creating jobs in an expansion? This paper decomposes plant level job flows into permanent and temporary components to answer this question, and finds that the permanent reallocation of jobs across plants accounts for approximately 30 percent of the cyclical fluctuations in aggregate employment.
Reconciling Unemployment Claims with Job Losses in the First Months of the COVID-19 Crisis
In the spring of 2020, many observers relied heavily on weekly initial claims for unemployment insurance benefits (UI) to estimate contemporaneous reductions in US employment induced by the COVID-19 pandemic. Though UI claims provided a timely, high-frequency window into mounting layoffs, the cumulative volume of initial claims filed through the May reference week substantially exceeded realized reductions in payroll employment and likely contributed to the historically large discrepancy between consensus expectations of further April-to-May job losses and the strong job gains reflected in ...
Have cyclical movements in the unemployment rate become more persistent?
I examine whether the cyclical behavior of unemployment has changed over the post WWII period. Specifically, I test whether cyclical movements in unemployment have become more persistent. Finding that they have, indeed, become more persistent, I then take some initial steps in explaining why. I find that the increase in persistence has affected private nonfarm payroll employment as well as unemployment and that increased persistence appears to be widespread across industries. At the same time, increased persistence owes primarily to greater persistence in job finding rates and greater ...
The causes and consequences of economic restructuring: evidence from the early 21st century
A number of industries underwent large and permanent reductions in employment growth at the beginning of this decade, a process we label as restructuring. We describe how restructuring occurred and what its consequences were for the economy. In particular, we find that restructuring stemmed largely from relative demand shocks (though technology shocks were important in some industries) and that elevated levels of permanent job destruction and permanent layoffs were distinguishing features of industries subject to restructuring. In addition, most workers displaced in restructuring industries ...