Tight Labor Markets and Extensive Job Searches: How changes in the unemployment rate affect job search behaviors

Abstract

Understanding the ways people look for jobs is an important part of understanding employment outcomes. This paper examines various factors that contribute to the decision to search for a new or different job and the extensiveness of resulting job searches. I pay particular attention to the effect of unemployment rates on searching, contending that because the unemployment rate is a measure of demand for labor, it should also alter job search behaviors. As the shape of the labor market changes, the chance of a worker being matched to an employer also changes: a higher unemployment rate makes it more difficult to find a job while a lower unemployment rate favors job searchers. Workers should respond to these shifts by altering their job search behaviors to increase the likelihood of being matched to an employer. By using more job search methods, workers exploit more sources of information about potential job openings. Thus, when unemployment rate is high, job searchers should use more extensive searches. Using data from the NLSY97, I show that the job search behaviors of young workers are sensitive to shifts in the unemployment rate. Young workers' job search behaviors change with fluctuations in the unemployment rate in both predictable and surprising ways.