Employment turnover was significantly lower following the Great Recession than following the previous two recessions.Employment

Constanza S. Liborio

Juan M. Sánchez

English

Research Papers in Economics

Economic SYNOPSES
short essays and reports on the economic issues of the day
2012 ■ Number 2
T
he change in employment, or net change in employ-
ment, is a commonly used measure of labor market
activity. However, another concept important for
understanding the labor market is job reallocation, or
employment turnover. The net change in employment is
the difference between jobs gained (positions filled) and
jobs lost (positions terminated) during a given period. Job
reallocation is the sum of these two variables. So, for
example, if one job is gained (one person is hired)
and one job is lost (one person is laid off or quits)
in an economy, the net change in total employment
would be zero and the employment turnover (the
number of jobs reallocated) would be two. 
The Business Employment Dynamics data series
published by the Bureau of Labor Statistics (BLS)
reports quarterly net employment changes as gross
job gains and gross job losses.1 This decomposition
allows for the study of the dynamics of job market
flows. The top chart compares employment dynamics
(of U.S. private-sector firms) for the most recent and
two previous recoveries by showing the net job gains
accumulated since the beginning of each recovery.2
During the 1991-92 recovery from the 1990-91 reces-
sion, the net employment change became positive in
the fifth quarter after the end of the recession. In the
2002-03 recovery from the 2001 recession, however,
the number of jobs continued to decrease—net job
gains quickly became and remained negative. This
phenomenon is commonly referred to as a “jobless
recovery.” During the current recovery from the Great
Recession, the net job gains of U.S. private-sector
firms was initially negative but more recently turned
slightly positive. 
The bottom chart displays employment turnover
for the three recovery episodes. The key finding is
that employment turnover was significantly lower
following the Great Recession than following the
other two recessions. A 1997 study by economists
Fuhrer and Schuh helps illustrate the significance of
this measure.3 They explain that the intensity of job reallo-
cation has consequences for unemployment, wage growth,
and productivity growth. On average, the number of jobs
reallocated per quarter reached 12,245,786 during the past
two recoveries, yet only 10,822,429 during the recovery
from the Great Recession.
Employment Dynamics During Economic Recoveries
Juan M. Sanchez, Economist
Constanza S. Liborio, Research Associate
Post-Recession Cumulative Net Employment Gains
–2,000
–1,500
–1,000
–500
0
500
1,000
1,500
1234567
Post-Recession Quarters
1991-92 Recovery
2009-11 Recovery
2002-03 Recovery
Post-Recession Employment Turnover
9,000
9,500
10,000
10,500
11,000
11,500
12,000
12,500
13,000
13,500
1234567
Post-Recession Quarters
Thousands of Jobs
2009-11 Recovery
2002-03 Recovery
1991-92 Recovery
Thousands of Jobs
NOTE: The end of the recessions, as determined by the National Bureau of 
Economic Research, are 1991:Q1, 2001:Q4, and 2009:Q2 for the 1990-91, 2001, 
and 2007-09 recessions, respectively. Data correspond to U.S. private-sector firms.
SOURCE: BLS. Data prior to 1992:Q3 are BLS research data not publically available.What is behind this pattern of slow employment growth
and low turnover? No one knows for sure, but a decrease
in labor reallocation may be caused by higher rigidity and
regulations in the labor market as well as more generous
unemployment welfare. Europe provides a major historic
example of this phenomenon. Caballero and Hammour’s
2000 study describes the importance of labor-market regu-
lation in explaining persistently high unemployment levels
in Europe.4 This evidence suggests that recent trends in
employment turnover in the United States should be
watched closely to better understand changes in employ-
ment and unemployment. ■
1 The specific data series used is from the Quarterly Census of Employment and
Wages; thus, calculations in this synopsis are constructed from the perspective
of firms, that is, employers. For an analysis of job market flows using household
data, that is, from the perspective of individuals, see Andolfatto, David and
Williams, Marcella M. “Many Moving Parts: A Look Inside the U.S. Labor
Market. Annual Report for the Year 2010.” Federal Reserve Bank of St. Louis,
April 2011; www.stlouisfed.org/publications/ar/2010/pages/ar10_2a.cfm. 
2 Economic recoveries are defined here as the seven quarters following the end
of a recession as determined by the National Bureau of Economic Research. 
3Fuhrer, Jeffrey and Schuh, Scott. “Beyond Shocks: What Causes Business Cycles?
An Overview,” in Jack Rabin and Stevens L. Glenn, eds., Handbook of Monetary
Policy. New York: Marcel Dekker, 2002, pp. 1-24.
4 Caballero, Ricardo J. and Hammour, Mohamad L. “Institutions, Restructuring,
and Macroeconomic Performance.” NBER Working Paper No. 7720, National
Bureau of Economic Research, May 2000; www.nber.org/papers/w7720.
Economic SYNOPSES Federal Reserve Bank of St. Louis      2
research.stlouisfed.org
Posted on January 20, 2012
Views expressed do not necessarily reflect official positions of the Federal Reserve System.
Employment turnover was 
significantly lower following the 
Great Recession than following 
the previous two recessions.

Employment dynamics during economic recoveries

http://research.stlouisfed.org/publications/es/12/ES_2012-01-20.pdf

Employment dynamics during economic recoveries

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