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Employment Creation and Destruction: An Analytical Review

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The capacity of markets to create jobs is typically measured by net employment changes. However, net job flows veil the dynamics underlying these aggregate figures. Recent studies have examined the cyclical behavior of the four components of net employment: jobs gained from business openings and expansions and jobs lost from business closings and contractions. This paper extends the inquiry to examine whether these employment components follow similar patterns across regions. The evidence indicates quite different behavior across regions than over time. Regional employment changes are primarily associated with job creation, whereas cyclical employment changes are associated with job destruction. Thus, policymakers need to differentiate between programs that stimulate regional job growth and those that help firms survive economic downturns.

Suggested citation: Eberts, Randall W., and Edward B. Montgomery. “Employment Creation and Destruction: An Analytical Review,” Federal Reserve Bank of Cleveland, Economic Review, vol. 30, no. 3, pp. 14-26, 08.01.1994.

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