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Lecture 1Labor Market from a Flow Perspective
Noah Williams
University of Wisconsin - Madison
Economics 714
Williams Economics 714
Labor Market Flows and Search
We will introduce dynamic models of the labor marketwith equilibrium unemploymentLabor market flows will be subject to frictions: it is costlyfor workers to find jobs and for firms to find workers to filljob openings.This will allow us to study the factors determining the levelof unemployment, its fluctuations, and how it may varyacross countries.We will also study the impacts of labor market policies andregulations
Williams Economics 714
Basic Facts on Labor Market Flows
US Labor Force in Sept. 2012: 142 million peopleUS working age population in 2012: 243.4 million peopleLabor force participation rate of about 63.6%.Employment-population ratio of 58.7%Between 1967 and 1993 the average job loss rate was 2.7%per month, average job finding rate was 43%, and averageunemployment rate 6.2%.In September 2012 job loss rate was 1.3% per month (with2.5% going out of labor force), finding rate was 19%, andunemployment rate was 9.1%.Large differences in employment, unemployment, and theirevolution in US and Europe.
Williams Economics 714
Employment/Population and Participation Rates
Williams Economics 714
Separation Rate and Job Finding Rate
1950 1960 1970 1980 1990 20000
0.01
0.02
0.03
0.04
0.05Job Separation Rate and Recession Indicator
1950 1960 1970 1980 1990 20000
0.1
0.2
0.3
0.4
0.5
0.6
Job Finding Rate and Recession Indicator
Williams Economics 714
Separation Rate and Unemployment Rate
1950 1960 1970 1980 1990 2000
3
4
5
6
7
8
9
10
Unemployment Rate and Trend
1950 1960 1970 1980 1990 2000
0.35
0.4
0.45
0.5
0.55
0.6
0.65Job Finding Rate and Trend
Williams Economics 714
Separations and Hires
Williams Economics 714
Williams Economics 714
Williams Economics 714
Length of Unemployment Spells
Unemployment Spell 8/89 10/92 10/06 3/11< 5 weeks 48% 35% 38% 18%
5 - 14 weeks 31% 28% 31% 22%15 - 26 weeks 11% 14% 14% 15%
> 26 weeks 9% 23% 16% 46%
Other countries: in Germany, France or the Netherlandsabout two thirds of all unemployed workers in 1989 wereunemployed for longer than six months.
Williams Economics 714
Williams Economics 714
Williams Economics 714
Median Duration of Unemployment
Williams Economics 714
The Beveridge Curve in the U.S., 2000-2013
Williams Economics 714
