Jobs ar risk, regional growth, and labor market flows

Abstract: 

(joint work with Monika Piazzesi and Martin Schneider)

This paper studies the connection between regional growth trends and labor market dynamics. New data on manufacturing worker flows for US cities 1957-1981 show that growing cities see on average more new hires and more voluntary quits, but fewer forced layoffs. Moreover, recessions in growing cities are special in that hiring and quits are low, whereas their key feature in shrinking cities is a spike in layoffs. A model of migration and on-the-job search generates comovement of growth, quits, and layoffs across cities. Its key feature is that jobs can become at risk: they have lower match surplus and are more likely to terminate. In growing cities, better prospects from on-the-job search lead workers to quit jobs at risk earlier, which reduces layoffs and misallocation.