Job Loss, Job Finding, and Unemployment in the U.S. Economy Over the Past Fifty Years

45 Pages Posted: 13 Dec 2005 Last revised: 24 Mar 2010

See all articles by Robert E. Hall

Robert E. Hall

Hoover Institution and Department of Economics, Stanford University; National Bureau of Economic Research (NBER)

Date Written: October 2005

Abstract

New data compel a new view of events in the labor market during a recession. Unemployment rises almost entirely because jobs become harder to find. Recessions involve little increase in the flow of workers out of jobs. Another important finding from new data is that a large fraction of workers departing jobs move to new jobs without intervening unemployment. I develop estimates of separation rates and job-finding rates for the past 50 years, using historical data informed by detailed recent data. The separation rate is nearly constant while the job-finding rate shows high volatility at business-cycle and lower frequencies. I review modern theories of fluctuations in the job-finding rate. The challenge to these theories is to identify mechanisms in the labor market that amplify small changes in driving forces into fluctuations in the job-finding rate of the high magnitude actually observed. In the standard theory developed over the past two decades, the wage moves to offset driving forces and the predicted magnitude of changes in the job-finding rate is tiny. New models overcome this property by invoking a new form of sticky wages or by introducing information and other frictions into the employment relationship.

Suggested Citation

Hall, Robert E., Job Loss, Job Finding, and Unemployment in the U.S. Economy Over the Past Fifty Years (October 2005). NBER Working Paper No. w11678. Available at SSRN: https://ssrn.com/abstract=819839

Robert E. Hall (Contact Author)

Hoover Institution and Department of Economics, Stanford University ( email )

Stanford, CA 94305-6010
United States
650-723-2215 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States
650-723-2215 (Phone)

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