Academic journal article Monthly Labor Review

Turnover and Unemployment

Academic journal article Monthly Labor Review

Turnover and Unemployment

Article excerpt

"For many years," writes Robert E. Hall in NBER Working Paper 11678, Job Loss, Job Finding, and Unemployment in the U.S. Economy Over the Past Fifty Years, "students of the labor market believed that recessions--periods of sharply rising unemployment--were the result of higher separation rates from jobs as well as lower job-finding rates." Hall goes on to cast some doubt on this received wisdom using data from the Bureau of Labor Statistics Job Openings and Labor Turnover Statistics (JOLTS) program. Specifically, the JOLTS data show that the separations rate did not rise much, if at all, during the 2001 recession. Thus, says Hall, it is the hiring decision and the course of job finding that labor market analysts should put more attention on to understand unemployment cycles. (The JOLTS data only cover the most recent recession; Hall uses regression analysis to support the more general statement.)

Defining a "job-finding" rate that would be useful in understanding cyclical variations in employment, admits Hall, is challenging--especially when it comes to defining the denominator. The conceptual definition is challenging enough: "A job -finding rate is the ratio of the flow from another activity into employment, divided by the number of people seeking to find jobs."

The problems come when one tries to attach specific numbers to the possibilities: the vast majority of those in the "unemployed" category are in both the numerator and denominator; only a small part of the employed would be looking for another job--they have strong comparative advantages in what they are doing now. …

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