Worker Flows and the Long-Run Behavior of Unemployment and Vacancies

The rate at which unemployed workers find jobs exhibits a strong negative relationship with the level of unemployment, a strong positive relationship with the level of job vacancies, and little variation at low frequencies. These stylized facts imply a positive correlation between unemployment and vacancy rates over long horizons. This observation contrasts with the well known negative correlation between unemployment and vacancies at business-cycle frequencies and is consistent with theories in which the natural rate of unemployment varies with structural change in the labor market. I demonstrate these relationships using new measures of trend unemployment and vacancies and calculations of aggregate worker flows that correct for changes in labor-force participation, but the basic patterns are evident under a variety of alternative measurement and detrending techniques. The results imply that long-run movements in the labor-market are driven by shifts in the Beveridge Curve, although the trend vacancy-unemployment ratio also appears to have moved lower over time