Job-to-job transitions, job finding and the ins of unemployment

Increases in the ins of unemployment during recessions are the result of two major forces: increased separations, or a fall in job finding of potential job-to-job transitions. This paper quantifies the contribution of these two channels using the flows approach to the labour market in the UK and US over a period of two decades including the Great Recession. First, the paper documents large variation in outcomes by reason for separation. Second, the paper shows that abstracting from this variation can significantly bias the importance of separations and job finding in driving changes in the ins of unemployment and the unemployment rate. Finally, the paper shows that fluctuations in layoffs and job finding conditional on separation are both important drivers of fluctuations in the ins of unemployment.