New Early-Warning Indicators of Macro-Financial Risk: A Mixture-of-Experts Approach

We study how workers' wealth and skills shape recovery from job displacement in turbulent labor markets. Unemployment depletes liquid assets, while turbulent transitions may place workers in jobs where accumulated skills transfer poorly. We develop and quantify a heterogeneous-agent directed-search model with incomplete markets, skill dynamics, and heterogeneous job tiers. Reemployment is a multidimensional allocation problem: skills determine where workers are most productive, while wealth shapes which job tier they can pursue. Workers self-insure through savings and tier mobility, so incomplete markets distort asset-skill sorting and make low-wealth workers more likely to downgrade. In U.S. data, persistent wage losses after turbulent transitions concentrate among low-wealth workers who move to lower tiers. The calibrated model reproduces these patterns and generates negative duration dependence in reemployment wages through wealth-driven downgrading. Policy counterfactuals show that unemployment insurance delivers larger welfare gains, whereas targeted vacancy subsidies generate larger output gains.