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Measuring Labor Market Uncertainty

Author

Listed:
  • Parker, Alex

    (Universität Regensburg)

  • Weber, Enzo

    (Institute for Employment Research (IAB), Nuremberg, Germany)

Abstract

"We develop a measure of labor market uncertainty at the aggregate level. We build a search and matching model with factor stochastic volatility, where the common component of the conditional volatilities is defined as labor market uncertainty. Using rich administrative data from Germany, we show that labor market uncertainty is countercyclical and captures salient historical narratives in the German labor market. Including the measure in a VAR, we find that labor market uncertainty shocks persistently increase unemployment and primarily operate through the hiring margin. Our findings suggest that, in contrast to macro uncertainty, labor market uncertainty is more likely to cause a decline in the search intensity in the job finding rate than in the reduction of vacancy postings." (Author's abstract, IAB-Doku) ((en))

Suggested Citation

  • Parker, Alex & Weber, Enzo, 2026. "Measuring Labor Market Uncertainty," IAB-Discussion Paper 202608, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    • Handle: RePEc:iab:iabdpa:202608
    DOI: 10.48720/IAB.DP.2608
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    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis

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