This paper measures the job finding and employment exit probabilities in the United States from 1948 to 2010. Throughout
the time period, fluctuations in the job finding probability explains three-quarters of the volatility in the unemployment
rate. This finding contradicts the conventional wisdom that fluctuations in the employment exit probability (or in job destruction)
are the key to understanding the business cycle.
The goal of this paper was to develop simple but robust measures of important moments in aggregate labor market
data. While the observation that the job finding rate is more cyclical than the employment exit rate suggests that papers
seeking to understand the cyclicality of the unemployment rate should focus primarily on the job finding rate, I have not
sought to establish causality; to do so without a theoretical framework seems futile. Moreover, the observed fluctuations in
the employment exit rate may be important for reasons that I do not capture in this paper, e.g. because of the substantial
costs of displacement (Jacobson et al., 1993). With these caveats, these measures of the job finding and employment exit
rates should provide a target for research that seeks to explain the causes and consequences of cyclical fluctuations in
unemployment.