The Recent Decline in Employment Dynamics

Henry R Hyatt,James Spletzer

doi:10.2139/ssrn.2230793

Abstract

In recent years, the rate at which workers and businesses exchange jobs has declined in the United States. Between 1998 and 2010, rates of job creation, job destruction, hiring, and separation declined dramatically, and the rate of job-to-job flows fell by about half. Little is known about the nature and extent of these changes, and even less about their causes and implications. 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 find that changes in the composition of the labor force and of employers explain relatively little of the decline. Exploiting some identities that relate the different measures to each other, we find that job creation and destruction could explain as much of a third of the decline in hires and separations, while job-to-job flows may explain more of the decline. We end our paper with a discussion of different possible explanations and their relative merits.

Highlights

Over the course of the last two decades, an increasing number of sources have provided data on the rate at which jobs and workers move across employers
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
In the Longitudinal Employer-Household Dynamics (LEHD) data, we find that 16.5 percent of the decline in hires and separations from 2001:Q1 to 2010:Q4 is associated with a decline in job creation and job destruction, whereas 83.5 percent is associated with a decline in churn

Summary

Introduction

Over the course of the last two decades, an increasing number of sources have provided data on the rate at which jobs and workers move across employers. This tells us that any explanation for the declining hires and separations rates will need to account for a decline in short-duration jobs.

Findings

Discussion

Conclusions