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The Flow Approach to Labor Markets: New Data Sources, Micro-Macro Links and the Recent Downturn

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Author Info

  • Davis, Steven J.

    ()
    (University of Chicago)

  • Faberman, R. Jason

    ()
    (Federal Reserve Bank of Chicago)

  • Haltiwanger, John C.

    ()
    (University of Maryland)

Abstract

New data sources and products developed by the Bureau of Labor Statistics and the Bureau of the Census highlight the dynamic character of U.S. labor markets. Private-sector job creation and destruction rates average nearly 8% of employment per quarter. Worker flows in the form of hires and separations are more than twice as large. The data also underscore the lumpy nature of micro-level employment adjustments. More than two-thirds of job destruction occurs at establishments that shrink by more than 10% within the quarter, and more than one-fifth occurs at those that go to zero employment. Our study also uncovers highly nonlinear relationships of worker flows to employment growth and job flows at the micro level. These micro relations interact with movements over time in the cross-sectional density of establishment growth rates to produce recurring cyclical patterns in aggregate labor market flows. Cyclical movements in the layoffs-separation ratio, for example, and the propensity of separated workers to become unemployed reflect distinct micro relations for quits and layoffs. A dominant role for the job-finding rate in accounting for unemployment movements in mild downturns and a bigger role for the job-loss rate in severe downturns reflect distinct micro relations for hires and layoffs.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1639.

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Length: 53 pages
Date of creation: Jun 2005
Date of revision:
Handle: RePEc:iza:izadps:dp1639

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Keywords: job destruction; job creation; separations; hires;

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References

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Citations

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Cited by:
  1. Helge Braun & Reinout De Bock & Riccardo DiCecio, 2009. "Supply shocks, demand shocks, and labor market fluctuations," Review, Federal Reserve Bank of St. Louis, issue May, pages 155-178.
  2. Bosch, Mariano & Maloney, William, 2006. "Gross worker flows in the presence of informal labor markets : the Mexican experience 1987-2002," Policy Research Working Paper Series 3883, The World Bank.
  3. Olivier Blanchard, 2005. "European Unemployment: The Evolution of Facts and Ideas," NBER Working Papers 11750, National Bureau of Economic Research, Inc.
  4. Bosch, Mariano & Maloney, William F., 2007. "Gross Worker Flows in the Presence of Informal Labor Markets: Evidence from Mexico, 1987-2002," IZA Discussion Papers 2864, Institute for the Study of Labor (IZA).
  5. 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.
  6. Ronald Bachmann, 2005. "Labour Market Dynamics in Germany: Hirings, Separations, and Job-to-Job Transitions over the Business Cycle," SFB 649 Discussion Papers SFB649DP2005-045, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  7. Robert Shimer, 2007. "Reassessing the Ins and Outs of Unemployment," NBER Working Papers 13421, National Bureau of Economic Research, Inc.
  8. Samaniego, Roberto M., 2008. "Can technical change exacerbate the effects of labor market sclerosis," Journal of Economic Dynamics and Control, Elsevier, vol. 32(2), pages 497-528, February.
  9. Helge Braun & Reinout De Bock & Riccardo DiCecio, 2006. "Aggregate shocks and labor market fluctuations," Working Papers 2006-004, Federal Reserve Bank of St. Louis.
  10. Strawinski, Pawel, 2008. "What drives the Unemployment Rate in Poland," MPRA Paper 11372, University Library of Munich, Germany.
  11. Paweł Strawiński, 2009. "Ins and Outs of Polish Unemployment," Central European Journal of Economic Modelling and Econometrics, CEJEME, vol. 1(3), pages 243-259, November.
  12. Mihir A. Desai & C. Fritz Foley & James R. Hines Jr., 2005. "Foreign Direct Investment and Domestic Economic Activity," NBER Working Papers 11717, National Bureau of Economic Research, Inc.
  13. R. Jason Faberman, 2005. "Studying the Labor Market with the Job Openings and Labor Turnover Survey," Working Papers 388, U.S. Bureau of Labor Statistics.

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