American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Temporary Layoffs, Loss-of-Recall, and Cyclical Unemployment Dynamics
American Economic Review
(pp. 862–96)
Abstract
We revisit the role of temporary layoffs in the business cycle. While some have emphasized a stabilizing effect due to recall hiring, we quantify from the data an important countercyclical destabilizing effect due to "loss-of-recall," whereby workers in temporary-layoff unemployment lose their job permanently. We develop a quantitative model allowing for endogenous flows of workers across employment and both temporary-layoff and jobless unemployment. The model captures both pre- and post-pandemic unemployment dynamics, including the contractionary role of loss-of-recall. We use our structural model to show that the Paycheck Protection Program generated sizable employment gains, in part by significantly reducing loss-of-recall.Citation
Gertler, Mark, Christopher Huckfeldt, and Antonella Trigari. 2026. "Temporary Layoffs, Loss-of-Recall, and Cyclical Unemployment Dynamics." American Economic Review 116 (3): 862–96. DOI: 10.1257/aer.20220749Additional Materials
JEL Classification
- E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
- E32 Business Fluctuations; Cycles
- I12 Health Behavior
- J41 Labor Contracts
- J63 Labor Turnover; Vacancies; Layoffs
- J64 Unemployment: Models, Duration, Incidence, and Job Search