Arnold Kling

Labor Market Turnover

Arnold Kling, Great Questions of Economics
Previous Entry Next Entry

When the monthly data on employment and unemployment are released, journalists will say something like "These data show that 100,000 people lost their jobs last month." In fact, the number of people who separate from their jobs in any given month is several million. This is made clear by a new set of reports from the Bureau of Labor Statistics, called Job Openings and Labor Transitions.

The report shows that in August U.S. businesses hired 4.8 million new workers. On the other hand, 5.4 million workers separated from their jobs, of which 1.8 million were discharged or laid off (the remainder quit, retired, or separated for other reasons).

The net change in unemployment is the residual between the flows out of jobs and into jobs. Note, however, that people who leave jobs but do not search for new jobs are not counted as unemployed.

In recent years, economists have become increasingly interested in the fact that the "gross flows" are so much larger than the residual. The new reports from the BLS may help to raise the awareness of this phenomenon.

Discussion Question. Do the data on gross flows affect the interpretation of unemployment from the standpoint of macroeconomic theory and policy?

Return to top