Measuring Labor Market Uncertainty

Abstract

"We develop a measure of labor market uncertainty at the aggregate level. We build a search and matching model with factor stochastic volatility, where the common component of the conditional volatilities is defined as labor market uncertainty. Using rich administrative data from Germany, we show that labor market uncertainty is countercyclical and captures salient historical narratives in the German labor market. Including the measure in a VAR, we find that labor market uncertainty shocks persistently increase unemployment and primarily operate through the hiring margin. Our findings suggest that, in contrast to macro uncertainty, labor market uncertainty is more likely to cause a decline in the search intensity in the job finding rate than in the reduction of vacancy postings." (Author's abstract, IAB-Doku) ((en))

Cite article

Parker, A. & Weber, E. (2026): Measuring Labor Market Uncertainty. (IAB-Discussion Paper 08/2026), Nürnberg, 34 p. DOI:10.48720/IAB.DP.2608