Cyclical Flows in Australian Labour Markets*

Abstract

Using a four‐state model, we show that Australian labour markets exhibited more mobility after 1980, but most gains occurred before 1993. We find large and significant procyclical effects in the transition probabilities from unemployment to jobs, which contribute significantly to the variations of unemployment. Transitions from jobs to unemployment are countercyclical, but the effects are small and in most cases insignificant. Although job‐losing and job‐finding both matter for the evolution of unemployment over the whole business cycle, job‐finding has become more important in recent years. During recessions, job‐finding is a bigger issue. Each transition probability explains only a small proportion of participation rates.