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Expecting the Unexpected: Job Losses and Household Spending

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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.

Suggested Citation

  • Fatih Karahan & Brendan Moore & Laura Pilossoph, 2019. "Expecting the Unexpected: Job Losses and Household Spending," Liberty Street Economics 20190327, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:87321
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    Cited by:

    1. Christopher D. Cotton & Vaishali Garga & Justin Rohan, 2020. "Consumption Heterogeneity by Occupation: Understanding the Impact of Occupation on Personal Consumption during the COVID-19 Pandemic," Working Papers 20-16, Federal Reserve Bank of Boston.

    More about this item

    Keywords

    expectations; unemployment; labor market risk; spending;
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment

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