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U.S. Labor Market Dynamics Revisited

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  • Eran Yashiv
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    Abstract

    The picture of U.S. labor market dynamics is opaque. Empirical studies have yielded contradictory findings and debates have emerged regarding their implications. This paper aims at clarifying the picture, which is important for the understanding of the operation of the labor market, for the study of business cycles, for the explanation of wage behavior, and for the formulation of policy. The paper determines what facts can be established, what are their implications, and what remains to be further investigated. The main contributions made here are: (i) Listing of data facts that can be agreed upon. These indicate that there is considerable cyclicality and volatility of both accessions to employment and separations from it. Hence, both are important for the understanding of the business cycle. (ii) Presenting the business cycle facts of key series. (iii) Pointing to specific gaps in the data picture: disparities in the measurement of the sizeable flows between employment and the pool of workers out of the labor force, disagreements about the relative volatility of job finding and separation rates across data sets, and the fact that the fit of the gross flows data with net employment growth data differs across studies and is not high. The definite characterization of labor market dynamics depends upon the closing of these data gaps.

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    Bibliographic Info

    Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0831.

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    Date of creation: Nov 2007
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    Handle: RePEc:cep:cepdps:dp0831

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    Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

    Related research

    Keywords: labor market dynamics; gross worker flows; job finding; separation; hiring; business cycles;

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    1. Robert Shimer, 2007. "Reassessing the Ins and Outs of Unemployment," NBER Working Papers 13421, National Bureau of Economic Research, Inc.
    2. R. Jason Faberman, 2005. "Studying the Labor Market with the Job Openings and Labor Turnover Survey," Working Papers, U.S. Bureau of Labor Statistics 388, U.S. Bureau of Labor Statistics.
    3. Eran Yashiv, 2005. "Evaluating the Performance of the Search and Matching Model," CEP Discussion Papers dp0677, Centre for Economic Performance, LSE.
    4. Canova, Fabio, 1998. "Detrending and business cycle facts," Journal of Monetary Economics, Elsevier, vol. 41(3), pages 475-512, May.
    5. Poterba, James M & Summers, Lawrence H, 1986. "Reporting Errors and Labor Market Dynamics," Econometrica, Econometric Society, Econometric Society, vol. 54(6), pages 1319-38, November.
    6. Bruce Fallick & Charles A. Fleischman, 2004. "Employer-to-employer flows in the U.S. labor market: the complete picture of gross worker flows," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 2004-34, Board of Governors of the Federal Reserve System (U.S.).
    7. Marianne Baxter & Robert G. King, 1999. "Measuring Business Cycles: Approximate Band-Pass Filters For Economic Time Series," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 575-593, November.
    8. Steven J. Davis & R. Jason Faberman & John Haltiwanger, 2006. "The Flow Approach to Labor Markets: New Data Sources and Micro-Macro Links," Journal of Economic Perspectives, American Economic Association, vol. 20(3), pages 3-26, Summer.
    9. Burnside, Craig, 1998. "Detrending and business cycle facts: A comment," Journal of Monetary Economics, Elsevier, vol. 41(3), pages 513-532, May.
    10. Lawrence J. Christiano & Terry J. Fitzgerald, 1999. "The Band Pass Filter," NBER Working Papers 7257, National Bureau of Economic Research, Inc.
      • Lawrence J. Christiano & Terry J. Fitzgerald, 2003. "The Band Pass Filter," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(2), pages 435-465, 05.
    11. Davis, Steven J. & Haltiwanger, John, 1999. "Gross job flows," Handbook of Labor Economics, Elsevier, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 41, pages 2711-2805 Elsevier.
    12. Dale T. Mortensen & Christopher A. Pissarides, 1993. "Job Creation and Job Destruction in the Theory of Unemployment," CEP Discussion Papers dp0110, Centre for Economic Performance, LSE.
    13. Shigeru Fujita & Garey Ramey, 2006. "The cyclicality of job loss and hiring," Working Papers 06-17, Federal Reserve Bank of Philadelphia.
    14. Joseph A. Ritter, 1993. "Measuring labor market dynamics: gross flows of workers and jobs," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 39-57.
    15. Michael W. Elsby & Ryan Michaels & Gary Solon, 2007. "The Ins and Outs of Cyclical Unemployment," NBER Working Papers 12853, National Bureau of Economic Research, Inc.
    16. Robert E. Hall, 2005. "Job Loss, Job Finding, and Unemployment in the U.S. Economy Over the Past Fifty Years," NBER Working Papers 11678, National Bureau of Economic Research, Inc.
    17. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
    18. Hoyt Bleakley & Ann E. Ferris & Jeffrey C. Fuhrer, 1999. "New data on worker flows during business cycles," New England Economic Review, Federal Reserve Bank of Boston, issue Jul, pages 49-76.
    19. Abowd, John M & Zellner, Arnold, 1985. "Estimating Gross Labor-Force Flows," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 3(3), pages 254-83, June.
    20. Stephen R. G. Jones & Craig Riddell, 2000. "The Dynamics of US Labor Force Attachment," Econometric Society World Congress 2000 Contributed Papers 0011, Econometric Society.
    21. Dale Mortensen & Eva Nagypal, 2007. "More on Unemployment and Vacancy Fluctuations," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 10(3), pages 327-347, July.
    22. Steven J. Davis & John Haltiwanger, 1995. "Measuring Gross Worker and Job Flows," NBER Working Papers 5133, National Bureau of Economic Research, Inc.
    23. Oliver Jean Blanchard & Peter Diamond, 1989. "The Beveridge Curve," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 20(1), pages 1-76.
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    Cited by:
    1. Robert Shimer, 2007. "Reassessing the Ins and Outs of Unemployment," NBER Working Papers 13421, National Bureau of Economic Research, Inc.
    2. Lin, Ching-Yang & Miyamoto, Hiroaki, 2012. "Gross worker flows and unemployment dynamics in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 26(1), pages 44-61.
    3. Carlos Carrillo-Tudela & Ludo Visschers, 2014. "Unemployment and Endogenous Reallocation over the Business Cycle," Economics Working Papers we1410, Universidad Carlos III, Departamento de Economía.
    4. Dustmann, Christian & Glitz, Albrecht & Vogel, Thorsten, 2009. "Employment, Wages, and the Economic Cycle: Differences between Immigrants and Natives," IZA Discussion Papers 4432, Institute for the Study of Labor (IZA).
    5. Bosch, Mariano & Esteban-Pretel, Julen, 2012. "Job creation and job destruction in the presence of informal markets," Journal of Development Economics, Elsevier, vol. 98(2), pages 270-286.
    6. Robert Dixon & Guay C. Lim & Jan C. van Ours, 2014. "The Effect of Shocks to Labour Market Flows on Unemployment and Participation Rates," CESifo Working Paper Series 4826, CESifo Group Munich.
    7. Fabio Canova & David Lopez-Salido & Claudio Michelacci, 2009. "The ins and outs of unemployment: An analysis conditional on technology shocks," Economics Working Papers 1213, Department of Economics and Business, Universitat Pompeu Fabra, revised Jan 2012.
    8. Alfonso Arpaia & Nicola Curci, 2010. "EU labour market behaviour during the Great Recession," European Economy - Economic Papers, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission 405, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.

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