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Working Paper
Quits, Layoffs, and Labor Supply
We develop a time series of quits and layoffs using the Current Population Survey, and analyze their relationship with labor supply decisions over the business cycle. Our findings challenge the assumption that most labor force exits from employment are voluntary quits. Instead, we show that 40% of these exits are precipitated by layoffs. With this distinction, we find both quits to non-participation and the share of workers exiting after a layoff falls during recessions. A workhorse search model is used to frame how these facts add nuance to our understanding of business cycles. Additional ...
Working Paper
What Quits and Layoffs Reveal About the Business Cycle
We introduce monthly CPS series that classify every separation by reason (quit or layoff) and destination (unemployment or non-participation), and use them to confront the workhorse model of labor market flows. The standard model overproduces quits, sends laid-off workers to unemployment when a third of them leave the labor force, and gets the cyclical direction of labor force attachment backwards. Adding selective layoffs and random quits repairs these facts and overturns what labor supply does over the cycle: a recession is partly stabilized from within. Two channels buffer employment and ...