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Advance Layoff Notices and Labor Market Forecasting

We collect rich establishment-level data about advance layoff notices filed under the Worker Adjustment and Retraining Notification (WARN) Act since January 1990. We present in-sample evidence that the number of workers affected by WARN notices leads state-level initial unemployment insurance claims, changes in the unemployment rate, and changes in private employment. The effects are strongest at the one and two-month horizons. After aggregating state-level information to a national-level “WARN factor” using a dynamic factor model, we find that the factor substantially improves out-of-sample forecasts of changes of manufacturing employment in real time.

JEL classification codes: E27, J65, K31.
Keywords: WARN act, mass layoffs, plant closings, unemployment, employment, initial UI claims.

Suggested citation: Krolikowski, Pawel M. and Kurt G. Lunsford. 2020. “Advance Layoff Notices and Labor Market Forecasting.” Federal Reserve Bank of Cleveland, Working Paper no. 20-03.

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