Mainly Employment: Survey-based News and the Business Cycle

53 Pages Posted: 14 Mar 2022

Date Written: January 07, 2022


Surprises in survey responses on perceived business conditions produce strong comovement in unemployment, consumption, investment, and output, and a muted response of inflation and measured total factor productivity (TFP). This suggests that news play an important role in explaining business cycle fluctuations, but also that attention should not be limited to TFP news. Employment news are the main driver of the overall index of reported business conditions. Vector autoregression impulse responses can be matched by a New Keynesian model in which individual risk, a positive supply of liquid funds, and complementarity between labour and capital inputs are modelled explicitly and the assumption of free entry of vacancies is done away with.

Keywords: News, unemployment, business cycles, search frictions, individual risk

JEL Classification: C30, E31, E32

Suggested Citation

Masolo, Riccardo, Mainly Employment: Survey-based News and the Business Cycle (January 07, 2022). Bank of England Working Paper No. 958, Available at SSRN: or

Riccardo Masolo (Contact Author)

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

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