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The Cyclicality of Job Loss and Hiring

Garey Ramey and Shigeru Fujita

University of California at San Diego, Economics Working Paper Series from Department of Economics, UC San Diego

Abstract: We 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. We 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 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 (search for similar items in EconPapers)
Date: 2006-09-25
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