Labor Quality Variation Over the Business Cycles in the Analyst Labor Market

Abstract:     
It is more difficult to find a job in recession than in boom years. Holding the occupation fixed, what happens to the labor quality of an entry-level job across the business cycles? Is the recession cohort better at their job than the boom cohort or do they show the same level of job performance? I answer these questions using security analysts’ panel data on earnings forecasts and other direct measures of job performance. A typical analyst from the recession cohort performs superbly at the level that is not matched by her counterpart from a non-recession cohort. In the long run, however, these superb analysts from the recession cohorts leave their security analyst job for a potentially better employee-job match. As a result, controlling for attrition in the long-run, a typical recession cohort analyst is largely comparable to her counterpart from a non-recession cohort in all measurable aspects of job performance. Taken together, these findings are most consistent with the hypothesis that a labor market that suffers from a negative demand shock due to recession does attract unusually talented new hires at first but the quality of employee-job match is worse among these new hires.

Keywords: Business Fluctuations, Analyst, Labor Productivity, Professional Labor Markets

JEL Classification: E32, G24, J23, J24, J44, J62

working papers series