Hiring Uncertainty: A New Labour Market Indicator

36 Pages Posted: 19 Mar 2014

See all articles by Ekkehard Ernst

Ekkehard Ernst

International Labour Organization (ILO)

Christian Viegelahn

International Labour Organization (ILO)

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-off s 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

Ernst, Ekkehard and Viegelahn, Christian, Hiring Uncertainty: A New Labour Market Indicator (February 7, 2014). Available at SSRN: https://ssrn.com/abstract=2411299 or http://dx.doi.org/10.2139/ssrn.2411299

Ekkehard Ernst

International Labour Organization (ILO) ( email )

Route des Morillons 4
Geneva, 1211
Switzerland
+41 22 799 77 91 (Phone)

Christian Viegelahn (Contact Author)

International Labour Organization (ILO) ( email )

Route des Morillons 4
Geneva, 1211
Switzerland
+41 22 799 72 64 (Phone)

HOME PAGE: http://perso.uclouvain.be/christian.viegelahn

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