Cyclical Employment and Unemployment Flows in the U.S.

45 Pages Posted: 23 Aug 2010 Last revised: 26 Aug 2010

See all articles by Thomas Coleman

Thomas Coleman

University of Chicago - Harris School of Public Policy; Close Mountain Advisors LLC

Date Written: August 20, 2010

Abstract

Unemployment in the U.S. has risen dramatically since the start of the recession in December 2007, going from about 6.8 million people in May 2007 to over 14.6 million in June 2010. This is often spoken of as "losing 7.8 million jobs," but this is a terribly misleading view of the issue. The reality is that flows of people and jobs each month are huge -- it would be more correct to say that 4-6 million jobs were lost each month, with a comparable (just slightly lower) number found each month. This paper examines some of the data regularities in the monthly gross flows published by the Bureau of Labor Statistics. The methodology is to analyze the transition rates and implied steady-state levels of employment and unemployment. This is an approach that, while not commonly used, does provide valuable insights. For example, declines in employment have been largely due to decreased probability of finding a job, with little net impact from changes in the probability of losing a job. Furthermore, in spite of a fall in the u-to-e transition contributing significantly to falling employment, the flow from unemployment to employment actually increased. As another example, changes in the probability of moving between unemployment and not in the labor force (NLF) look like an "anti-discouraged worker" effect -- during the recession people are more likely to move from NLF to unemployment and less likely to move from unemployment to NLF.

Keywords: Job flows, employment fluctuations, labor force, employment dynamics, worker flows

JEL Classification: E32, E24, J63, J64, C82

Suggested Citation

Coleman, Thomas, Cyclical Employment and Unemployment Flows in the U.S. (August 20, 2010). Available at SSRN: https://ssrn.com/abstract=1663442 or http://dx.doi.org/10.2139/ssrn.1663442

Thomas Coleman (Contact Author)

University of Chicago - Harris School of Public Policy ( email )

1155 East 60th Street
Chicago, IL 60637
United States

Close Mountain Advisors LLC ( email )

19 Davenport Ave.
Unit B
Greenwich, CT 06830
United States

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