The Recent Decline in Employment Dynamics | E-Axes
 

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The Recent Decline in Employment Dynamics

Abstract

In this paper, we document and attempt to explain the recent decline in employment dynamics. Our empirical work relies on the four leading datasets of quarterly employment dynamics in the United States – the Longitudinal Employer-Household Dynamics (LEHD), the Business Employment Dynamics (BED), the Job Openings and Labor Turnover Survey (JOLTS), and the Current Population Survey (CPS). We begin by examining changes in labor market composition as an explanation for the decline in employment dynamics. Our analysis shows that changes in the composition of workers and businesses can explain only a small amount of the decline in employment dynamics. We then analyze the relationship between the declines in gross job flows and the declines in gross worker flows. We find that the decline in gross job flows can be described as a narrowing of the distribution of employer growth rates, but this change in the distribution of gross job flows only explains about a third of the decline in gross worker flows. This implies that whatever economic forces are driving the declines in gross job flows, there are other independent forces that are driving the declines in gross worker flows. We also find that the declines in gross worker flows are being driven by a decline in the number of short-duration jobs in the U.S. economy. We end our paper with a discussion of possible theoretical explanations for the decline in employment dynamics, including increases in adjustment costs, changes in the job matching process, the role of uncertainty, and changes in the production process.

To download the PDF version of the working paper click here.


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