efficient job search 469
TABLE 1
Summary Statistics, Quarterly U.S. Data
xuvh
ue
h
eu
h
ee
p
SD(x)/SD(p) 9.56 10.9 5.96 5.48 5.98 1
Autocorr(x) .872 .909 .822 .698 .597 .760
Corr(7, x):
u 1 ⫺.902 ⫺.916 .778 ⫺.634 ⫺.283
v . . . 1 .902 ⫺.778 .607 .423
h
ue
... ... 1 ⫺.677 .669 .299
h
eu
... ... ... 1 ⫺.301 ⫺.528
h
ee
. . . . . . . . . . . . 1 .208
p ... ... ... ... ... 1
Note.—The seasonally adjusted unemployment rate, u, is constructed by the Bureau
of Labor Statistics (BLS) from the Current Population Survey (CPS). The seasonally ad-
justed Help-Wanted Advertising Index, v, is constructed by the Conference Board. The
UE and EU rates, and , are constructed from the seasonally adjusted unemployment
ue eu
hh
rate and the short-term unemployment rate as explained in App. B. The EE rate, , is
ee
h
constructed by Nagypa´l (2007) from the CPS microdata as explained in App. B. The
variables u, v, , , and are quarterly averages of monthly series. Average labor
ue eu ee
hh h
productivity, p, is seasonally adjusted real average output per worker in the nonfarm
business sector constructed by the BLS. The series for u, v, , , and p cover the period
ue eu
hh
1951(I)–2006(II). The series for covers the period 1994(I)–2006(II). The standard
ee
h
deviation of is expressed relative to the standard deviation of p over the period 1994(I)–
ee
h
2006(II), and the correlation of with u, v,,,andp refers to the period 1994(I)–
ee ue eu
hhh
2006(II). All variables are reported in logs as deviations from a Hodrick-Prescott (HP)
trend with smoothing parameter 1,600.
I. Introduction
In the U.S. labor market, workers move frequently between employment
and unemployment and across different employers. On average, the
rate at which unemployed workers move into employment (henceforth,
the UE rate) is 42 percent a month, the rate at which employed workers
move into unemployment (the EU rate) is 2.6 percent a month, and
the rate at which workers move from one employer to the other (the
EE rate) is 2.9 percent a month. These transition rates are not only
large but also very volatile at the business cycle frequency (relative to
labor productivity), thus contributing to the large volatility of unem-
ployment and vacancies. As documented in table 1, the UE, EU, and
EE rates are five times as volatile as labor productivity, and the unem-
ployment and vacancy rates are more than 10 times as volatile as labor
productivity. Moreover, the cyclical fluctuations in the UE, EU, and EE
rates display a clear pattern of correlations with the cyclical fluctuations
in unemployment and vacancies. As documented in table 1, the UE and
EE rates are strongly negatively correlated with unemployment and pos-
itively correlated with vacancies, and the EU rate is strongly positively
correlated with unemployment and negatively correlated with vacancies.
This paper proposes a model of directed search on the job in which
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