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Job flows, jobless recoveries, and the Great Moderation

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Author Info
R. Jason Faberman
Abstract

This paper uses new data on job creation and job destruction to find evidence of a link between the jobless recoveries of the last two recessions and the recent decline in aggregate volatility known as the Great Moderation. The author finds that the last two recessions are characterized by jobless recoveries that came about through contrasting margins of employment adjustment—a relatively slow decline in job destruction in 1991-92 and persistently low job creation in 2002-03. In manufacturing, he finds that these patterns followed a secular decline in the magnitude of job flows and an abrupt decline in their volatility. A structural VAR analysis suggests that these patterns are driven by a decline in the volatilities of the underlying structural shocks in addition to a shift in the response of job flows to these shocks. The shift in structural responses is broadly consistent with the change in job flow patterns observed during the jobless recoveries.

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Paper provided by Federal Reserve Bank of Philadelphia in its series Working Papers with number 08-11.

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Date of creation: 2008
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Handle: RePEc:fip:fedpwp:08-11

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Related research
Keywords: Job analysis ; Employment ; Unemployment;

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  1. Steven J. Davis & John Haltiwanger & Ron Jarmin & Javier Miranda, 2006. "Volatility and Dispersion in Business Growth Rates: Publicly Traded versus Privately Held Firms," NBER Working Papers 12354, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  2. Christopher L. Foote, 1998. "Trend Employment Growth And The Bunching Of Job Creation And Destruction," The Quarterly Journal of Economics, MIT Press, vol. 113(3), pages 809-834, August. [Downloadable!] (restricted)
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  3. James H. Stock & Mark W. Watson, 2002. "Has the Business Cycle Changed and Why?," NBER Working Papers 9127, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Kevin J. Stiroh, 2006. "Volatility accounting: a production perspective on increased economic stability," Staff Reports 245, Federal Reserve Bank of New York. [Downloadable!]
  5. Giorgio Primiceri & Alejandro Justiniano, 2006. "The Time Varying Volatility of Macroeconomic Fluctuations," 2006 Meeting Papers 353, Society for Economic Dynamics. [Downloadable!]
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  6. Kristie M. Engemann & Michael T. Owyang, 2007. "Whatever happened to the business cycle? a Bayesian analysis of jobless recoveries," Working Papers 2007-013, Federal Reserve Bank of St. Louis. [Downloadable!]
  7. Steven J. Davis & John Haltiwanger, 1999. "On the Driving Forces behind Cyclical Movements in Employment and Job Reallocation," American Economic Review, American Economic Association, vol. 89(5), pages 1234-1258, December. [Downloadable!] (restricted)
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  8. Valerie A. Ramey & Daniel J. Vine, 2006. "Declining Volatility in the U.S. Automobile Industry," American Economic Review, American Economic Association, vol. 96(5), pages 1876-1889, December. [Downloadable!]
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  9. Olivier Blanchard & John Simon, 2001. "The Long and Large Decline in U.S. Output Volatility," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 32(2001-1), pages 135-174. [Downloadable!]
  10. Stacey L. Schreft & Aarti Singh, 2003. "A closer look at jobless recoveries," Economic Review, Federal Reserve Bank of Kansas City, issue Q II, pages 45-73. [Downloadable!]
  11. Davis, Steven J & Haltiwanger, John C, 1992. "Gross Job Creation, Gross Job Destruction, and Employment Reallocation," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 819-63, August. [Downloadable!] (restricted)
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  12. Steven J. Davis & John Haltiwanger, 1990. "Gross Job Creation and Destruction: Microeconomic Evidence and Macroeconomic Implications," NBER Chapters, in: NBER Macroeconomics Annual 1990, Volume 5, pages 123-186 National Bureau of Economic Research, Inc. [Downloadable!]
  13. Steven J. Davis & John C. Haltiwanger & Scott Schuh, 1998. "Job Creation and Destruction," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262540932, January.
  14. Erica L. Groshen & Simon Potter, 2003. "Has structural change contributed to a jobless recovery?," Current Issues in Economics and Finance, Federal Reserve Bank of New York, issue Aug. [Downloadable!]
  15. Kathryn Koenders & Richard Rogerson, 2005. "Organizational dynamics over the business cycle: a view on jobless recoveries," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 555-580. [Downloadable!]
  16. Robert Shimer, 2007. "Reassessing the Ins and Outs of Unemployment," NBER Working Papers 13421, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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