Measuring Matching Efficiency with Heterogeneous Jobseekers

Matching efficiency is the productivity of the process for matching would-be workers to available jobs. Measurement of match efficiency follows the same principles as measuring a Hicks-neutral index of productivity of production. We develop a framework for measuring matching productivity when the population of jobseekers is heterogeneous. The efficiency index for each type of jobseeker is the monthly job-finding rate for the type adjusted for the overall tightness of the labor market. We break jobseekers into nine groups -- six for unemployed people by source of unemployment, plus jobseekers classified as out of the labor force and two types of people currently holding jobs but looking to make a job-to-job transition. The last three groups account for 78 percent of new hires during normal times. We focus on the period from 2005 through 2012. We find that overall matching efficiency declined over the period, but hardly more than its earlier downward trend. It rose in the year of maximum employment decline, 2009. Matching efficiency declined after 2007 in some types of unemployment, notably permanent job loss, quitting, and new entrants, but rose in others, such as unemployment initiated as a layoff with expectation of recall. Efficiency remained steady during the Great Recession for job-to-job transitions. In its peak year, 2010, unemployment was about one percentage point higher that it would have been if matching efficiency had remained constant.