Climate Shocks and Unemployment Claims

Abeeb Olaniran (), Xin Sheng (), Oguzhan Cepni () and Rangan Gupta
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Abeeb Olaniran: Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa
Xin Sheng: Lord Ashcroft International Business School, Anglia Ruskin University, Chelmsford, United Kingdom
Oguzhan Cepni: Ostim Technical University, Ankara, Turkiye; University of Edinburgh Business School, Centre for Business, Climate Change, and Sustainability; Department of Economics, Copenhagen Business School, Denmark

No 202536, Working Papers from University of Pretoria, Department of Economics

Abstract: Using a US state-level climate risk measure and the local projections (LP) framework, this study analyzes both linear and asymmetric effects of climate shocks on unemployment claims. The results provide strong evidence that climate shocks significantly increase both initial and continuing claims, with the linear estimates showing a stronger impact on initial claims. In the nonlinear framework, where climate risk and economic condition indices are used as regime-switching variables, we also find asymmetric effects of climate shocks across both types of claims. Specifically, climate shocks exert stronger pressure on initial claims under high-climate-risk regimes, while continuing claims respond more under low-risk regimes. When the economic condition index is applied as a regime-dependent variable, climate shocks are more influential during expansions than during recessions, when claims are already elevated and labor markets are slack. Overall, the findings highlight that climate shocks affect labor markets in complex, state-dependent ways, offering valuable insights for policymakers aiming to design effective mitigation strategies and enhance labor market resilience.

Keywords: Climate shocks; Linear and Non-Linear frameworks; Unemployment (search for similar items in EconPapers)
JEL-codes: C23 E24 Q54 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2025-09
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