The Cyclicality of Job Loss and Hiring

Abstract

In this paper the authors study the cyclical behavior of job loss and hiring using CPS worker flow data, adjusted for margin error and time aggregation error. The band pass filter is used to isolate cyclical components. They consider both total worker flows and transition hazard rates within a unified framework. Our results provide overwhelming support for a separation-driven view of employment adjustment, whereby total job loss and hiring rise sharply during economic downturns, initiated by increases in the job loss hazard rate. Worker flows and transition hazard rates are highly volatile at business cycle frequencies. These patterns are especially strong among prime-age workers. For young workers, job loss and hiring adjust procyclically due to movements into and out of the labor force.

Keywords: Job loss, Hiring, CPS worker flows

JEL Classification: J63, J64