Discouraging Workers: Estimating the Impacts of Macroeconomic Shocks on the Search Intensity of the Unemployed

Abstract

Discouraged and marginally attached workers have received increased attention from policy makers over the past several years. Theoretically, periods of recessions and high unemployment should directly influence individual’s decisions whether or not to search for employment, creating more discouraged workers. Since 2003, there have been a number of large macroeconomic shocks (e.g. housing bubble, credit crunch, mass layoffs, etc.) which should affect job search intensity. To date, the relative magnitude of these shocks on the search intensity of the unemployed (but currently undiscouraged workers) has not been established in the literature. Using daily time use dairies from the American Time Use Survey 2003-2009 allow us to proxy search intensity directly by aggregating time spent in minutes on several job search activities: time spent sending out resumes, contacting employers, interviewing, reading ads on the internet and so forth. Results from Tobit estimation indicate the existence of significant negative wealth effects on search intensity through changes in the stock market and housing values that help explain the apparent acyclicality of search intensity observed in the data.

Keywords: search intensity, macroeconomic shocks, discouraged workers, business cycles

JEL Classification: J2, J6, J1, E24, E32