Consumption effects of job loss expectations—New evidence for the euro area

António Dias da Silva, Desislava Rusinova and Marco Weißler

European Economic Review, 2025, vol. 179, issue C

Abstract: Job loss expectations have predictive power for job loss and consumption. Using novel data, we find that the negative consumption response to an unexpected job loss is muted for workers with ex-ante job loss expectations — consistent with the Permanent Income Hypothesis — but stronger for workers with higher expected shock persistence. However, we do not find a positive consumption response of workers who unexpectedly retain their job. We relate this to persistent job loss expectations of non-displaced workers and therefore low persistence of the positive income shock. These heterogeneous results have important implications for how expectations shape economic behaviour.

Keywords: Job loss expectations; Consumption; ECB Consumer Expectations Survey (CES); Permanent income hypothesis (PIH) (search for similar items in EconPapers)
JEL-codes: D12 D84 J63 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:179:y:2025:i:c:s0014292125001308

DOI: 10.1016/j.euroecorev.2025.105080

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