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Temporary Layoffs, Loss-of-Recall, and Cyclical Unemployment Dynamics

Mark Gertler¹; Christopher Huckfeldt²; Antonella Trigari³

¹ New York University, and NBER (email: ) · ² Board of Governors of the Federal Reserve System (email: ) · ³ Bocconi University, CEPR, and IGIER (email: )

We revisit the role of temporary layoffs in the business cycle. While some have emphasized a stabilizing effect due to recall hiring, we quantify from the data an important countercyclical destabilizing effect due to “loss-of-recall,” whereby workers in temporary-layoff unemployment lose their job permanently. We develop a quantitative model allowing for endogenous flows of workers across employment and both temporary-layoff and jobless unemployment. The model captures both pre- and post-pandemic unemployment dynamics, including the contractionary role of loss-of-recall. We use our structural model to show that the Paycheck Protection Program generated sizable employment gains, in part by significantly reducing loss-of-recall. (JEL E24, E32, I12, J41, J63, J64)

DOI

10.1257/aer.20220749

Volume

116 (3)

Pages

862-896

Language

en

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BibTeX

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