Quits, Layoffs, and Labor Supply (joint with Amanda Michaud)
Click here for the paper (NEW version): Paper
Click here for the monthly updated quit and layoff timeseries: QLMonthly
We analyze quits and layoffs leading to unemployment or non-participation using real-time Current Population Survey data. Standard employment to unemployment (EU) and employment to non-participation (EN) flows substantially mischaracterize the nature of job separations and their cyclical properties. Layoffs are 20% more common than EU flows, while quits are 45% less common than EN flows. Over the business cycle, layoffs contribute 15% more to unemployment fluctuations than EU and are the main driver of employment fluctuations. The negative correlation of quits and layoffs reduces the volatility of total separations, but laid off workers are more likely to stay in the labor force during downturns, amplifying unemployment volatility by 25%. These data are useful to understand slack and improve labor market forecasting.
Fed Note (11/2024): Where is the U.S. labor market heading? Interpreting the mixed signals
FRB Minneapolis article (11/2024): Leaving your job? Losing your job? Where you end up might reveal a lot about the state of the economy
Reassessing Labor Market Flows: The Role of Marginal Workers and the Composition of Layoffs and Quits (joint with Amanda Michaud)
Click here for the latest draft: Paper
We develop a framework in which the circumstances of an employment separation (quit or layoff) and destination (unemployment or non-participation) inform estimates of the marginal workforce and their impact on the labor market throughout the business cycle. Quits and the participation choices of laid off workers critically inform our analysis. In the model, laid off workers who exit the labor force are those closest to the margin of participation and have the highest extensive margin labor supply elasticity. Using monthly CPS data, we document that over a third of laid off workers exit the labor force and this share is procyclical. Combining data and theory we find that 48% of layoffs selectively target workers near the margin of participation but this falls to 24% in recessions. Modelling the employment surplus distribution and marginal workforce allows us to analyze the role of labor supply in shaping the business cycle.
Spousal Insurance, Precautionary Labor Supply, and the Business Cycle (R&R at International Economic Review)
Click here for the draft (Revised draft coming soon!): Paper
I document that married women are less likely to leave the labor force and are more attached to employment in recessions. Using a two-person household incomplete assets markets model with labor market frictions, I show that married women exhibit precautionary labor supply in response to the higher threat of job loss experienced by their husband in recessions. Quantitative analysis shows that married women's precautionary labor supply behavior is an important mechanism of intra-household risk sharing and accounts for 30% of married women's low cyclicality of employment. Furthermore, I show that spousal insurance reduces consumption volatility in married households by 30% over the business cycle.
Cyclicality of Hours Worked by Married Women and Spousal Insurance (R&R at Journal of Demographic Economics)
In contrast to most macroeconomic models which predict strong procyclical hours, I document that married women’s hours are significantly less cyclical than hours worked by married men and singles. I analyze macro evidence on hours and employment volatility as well as flow rates and show that procyclical E-to-N transition rates imply countercyclical attachment to employment for married women. Using micro-level data, I explore sources for married women’s countercyclical employment attachment and find that it is associated with higher actual and risk of job loss for the husband which indicates a spousal insurance motive.
From Trend to Cycle: the Changing Careers of Married Women and Business Cycle Risk (joint with Amanda Michaud)
The rise in hours and employment of married women has been driven by a rise of "career women" with highly persistent full-time participation. We derive implications of this secular change for the cyclically aggregate labor using a unified theory where increases in the returns to tenure and decreasing child care costs change women's choice of career paths. We find that, while the cyclicality of hours varies greatly across career types, the changing composition of careers and families nets little change in the cyclicality of aggregate hours, but redistributes the cyclical risk across household types. We explore implications for households' welfare, risk sharing, and savings, by cohort and for each recessionary episode over the computed transition from 1975-2015.
Household Insurance in a Pandemic (joint with Amanda Michaud)
Living in a married household typically mitigates income risk. Is this true during a pandemic? On the one hand, the presence of two potential earners reduces the household income risk associated with a cut in hours, job loss, or a stay at home order. On the other, married couples are more likely to have children to care for during a stay at home order and larger households are more likely to have a member with a health condition that makes them vulnerable to severe illness if they contract the virus. Using a structural model of labor supply, we measure how these factors affect the welfare outcomes of different household types and the aggregate dynamics of employment in response to the COVID-19 pandemic.