Hiring Uncertainty: A New Labour Market Indicator
36 Pages Posted: 19 Mar 2014
Date Written: February 7, 2014
Abstract
This paper develops a forward-looking indicator for macroeconomic uncertainty that employers are confronted with when they take decisions about the size of their workforce. The model that provides the basis for this uncertainty indicator interprets hires and lay-offs of workers as an investment into projects with uncertain return. Employers decide when to undertake this investment. Uncertainty can then be derived as a function of a labour productivity threshold above which it is profitable for employers to hire workers. The measure that is first theoretically derived is then taken to the data. Economy-wide uncertainty for G7 economies and uncertainty by economic sector for the United States are calculated from data on hiring demand and unit labour costs. The resulting quarterly time series demonstrate that in most economies hiring uncertainty went up at the onset of the Great Recession and has remained at an elevated level since then.
Keywords: Crisis, Employer, Hiring, Risk, Uncertainty, Unemployment
JEL Classification: D80, E66, J23, J63
Suggested Citation: Suggested Citation