FIRMS’ EMPLOYMENT DYNAMICS AND THE STATE OF THE LABOR MARKET

According to search and matching theory, a greater availability of unemployed workers should make it easier for a firm to fill a vacancy, but more vacancies at other firms should make recruitment more difficult. Simulating a theoretical model of a firm facing perfect competition in the product market and no convex adjustment costs (standard assumptions in the search and matching literature), I find that shocks to vacancies and unemployment lead to economically significant employment responses. Simulating a more realistic model with imperfect competition in the product market and convex adjustment costs, I find small employment effects of shocks to vacancies and unemployment. In particular, shocks to the number of unemployed seem to be unimportant. Estimating an employment equation on a panel of Swedish firms, I find that neither the number of unemployed workers nor the number of vacancies in the local labor market is important for firms’ employment decisions.

Exploring Midwest manufacturing employment from 1990 to 2019

Using data from the Current Employment Statistics program, this article explores manufacturing employment dynamics between 1990 and 2019 in the Midwest region of the United States. The article compares and contrasts employment trends for both the region as a whole and the individual states that comprise it. Additionally, the article presents an examination of selected detailed industries. For context, the article uses periods within historical business cycles to frame analysis of manufacturing employment trends.

Keynesian Supply Shocks and Hayekian Secondary Deflations

In response to the COVID-19 lockdown policies, Guerrieri et al. (2020) developed a new concept: the Keynesian supply shock. A Keynesian supply shock is an aggregate supply shock that leads to an even larger aggregate demand shock. This paper suggests that Keynesian supply shocks are very similar to the secondary deflations suggested by Hayek (1931), and US data from the 2007–09 financial crisis show that these concepts may help to explain employment dynamics in the midst of a crisis. This fact implies that long-standing policy advice based on Austrian business cycle theory would be useful in responding to Keynesian supply shocks.