Reassessing the Ins and Outs of Unemployment
This paper uses readily accessible data to
measure the probability that an employed worker becomes unemployed and the
probability that an unemployed worker finds a job, the ins and outs of
unemployment. The job finding probability is strongly procyclical and the
separation probability is nearly acyclical, particularly during the last two decades.
Using the underlying microeconomic data, the paper shows that these results are
not due to compositional changes in the pool of searching workers, nor are they
due to movements of workers in and out of the labor force. These results
contradict the conventional wisdom that has guided the development of macroeconomic
models of the labor market during the last fifteen years.