Quits, Layoffs, and Labor Supply

Kathrin Ellieroth () and Amanda Michaud

No 94, Opportunity and Inclusive Growth Institute Working Papers from Federal Reserve Bank of Minneapolis

Abstract: We develop a time series of quits and layoffs using the Current Population Survey, and analyze their relationship with labor supply decisions over the business cycle. Our findings challenge the assumption that most labor force exits from employment are voluntary quits. Instead, we show that 40% of these exits are precipitated by layoffs. With this distinction, we find both quits to non-participation and the share of workers exiting after a layoff falls during recessions. A workhorse search model is used to frame how these facts add nuance to our understanding of business cycles. Additional results explore regularities of these patterns in the cross section of workers, in the COVID-19 recovery, and in comparison to the JOLTS series on quits and layoffs.

Keywords: Labor supply; Quits; Business cycles; Layoffs (search for similar items in EconPapers)
JEL-codes: E24 E32 J21 (search for similar items in EconPapers)
Date: 2024-07-18
New Economics Papers: this item is included in nep-lma
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedmoi:98594

DOI: 10.21034/iwp.94

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