Working Paper: NBER ID: w28083
Authors: Eliza Forsythe; Lisa B. Kahn; Fabian Lange; David G. Wiczer
Abstract: We report on the state of the labor market midway through the COVID recession, focusing particularly on measuring market tightness. As we show using a simple model, tightness is crucial for understanding the relative importance of labor supply or demand side factors in job creation. In tight markets, worker search effort has a relatively larger impact on job creation, while employer profitability looms larger in slack markets. We measure tightness combining job seeker information from the CPS and vacancy postings from Burning Glass Technologies. To parse the former, we develop a taxonomy of the non-employed that identifies job seekers and excludes the large number of those on temporary layoff who are waiting to be recalled. With this taxonomy, we find that effective tightness has declined about 50% since the onset of the epidemic to levels last seen in 2016, when labor markets generally appeared to be tight. Disaggregating market tightness, we find mismatch has surprisingly declined in the COVID recession. Further, while markets still appear to be tight relative to other recessionary periods, this could change quickly if the large group of those who lost their jobs but are not currently searching for a range of COVID-related reasons reenter the search market.
Keywords: No keywords provided
JEL Codes: E3; J2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| labor market tightness (J20) | job creation (J68) |
| profitability (L21) | job creation (J68) |
| search effort (C90) | job creation (J68) |
| labor market tightness (J20) | job openings (J68) |
| labor market tightness (J20) | job seekers (J68) |