Job Separation Rate

The job separation rate is a nice way of saying the “quitting rate” of workers at their jobs. The faster people quit their jobs, a.k.a. the higher the job separate rate, the higher employment will be at any given time in the long run, holding all else constant.

Question: What if we didn’t hold all else constant?

Answer: Unemployment isn’t just affected by how fast people quit, but also by how fast they find a new job, i.e. the “job finding rate.”

Together, the job separation rate and the job finding rate create the long-term (or “natural”) unemployment rate. This explains why we’ll never get down to 0% unemployment. Somewhere out there, there’s always someone telling their boss to suck it, contributing to the job separation rate and the long run unemployment rate.

See: Unemployment Rate.

Related or Semi-related Video

Finance: What is the Unemployment Rate?15 Views

00:00

finance a la shmoop what is the unemployment rate so negative like

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shouldn't it be the employment rate at least that way we'd have a bigger number

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and bigger is better in the u.s. right well anyway the unemployment rate in

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this country is tracked carefully because it's one of the Canaries in the

00:20

mine shaft giving us an early heads-up on the direction of the economy well [canary hopping in cage in mineshaft]

00:25

jobs are generally highly volatile in a given range and the government copiously

00:29

inspects this data as it affects so many other things principally the costs of

00:34

renting money has set out by the Fed because high employment stimulates

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inflation and low does the opposite well the government's gonna ask is the

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unemployment rate shrinking too fast I eat everyone's getting jobs well if so [government officials in conference]

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then beware inflation is coming which historically has motivated the Fed to

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raise interest rates in response or constrict the supply of cash out there

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and the opposite is true as well one of the big cocktail party conflicts and if

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you find yourself at a cocktail party debating this notion make like the

01:04

Jordan Peele movie and get out but if you can't and you must debate well there

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is a quote natural rate unquote of unemployment of around five or six

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percent yeah zero percent unemployment ain't never

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gonna happen generally the higher the unemployment rate the worse shape the

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economy is in but remember the unemployment rate doesn't tell the whole

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story the government can help create a bunch of temporary or low-paying jobs

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too cosmetically raise the employment rate in the short term like ahead of an [happy government officials in conference]

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election but the quality of those jobs is probably not great like think temp

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workers at the DMV well after a while of longer term unemployment some people [long line at the DMV]

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will just give up hunting for jobs and if they don't even go on indeed or

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Glassdoor looking for work so they're kind of permanently in the unemployment

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numbers so the unemployment rate might seem to be a bit less dire in that case [unemployed people holding up cardboard signs]

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but in fact well there might still be a lot of people who needed jobs out there

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we don't know we're just looking for some numbers to help us direct

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understanding of where the economy has gone and help us then tweak things so

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interest rates are optimized at the inflation numbers that we want to hit

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got it not everyone is qualified to stick that thing on the back of your

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license plate that shows you red yeah a whole lot of government workers I [hand adds stickers on back of license place]

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guess do that now bad times

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