Perceived unemployment risks over business cycles / William Du, Adrian Monninger, Xincheng Qiu, Tao Wang. : FB3-5/2025-23E-PDF

"We backcast subjective expectations on job finding and separation in the Survey of Consumer Expectations to 1978, and use real-time machine learning forecasting to proxy their objective counterparts. We document stickiness in job finding and separation expectations in reflecting changes in real-time job finding and separation risks and their substantial heterogeneity across observable and unobservable dimensions. Calibrating these facts into a heterogeneous-agent consumption-saving model reveals that belief stickiness attenuates the precautionary saving channel. As a result, workers under-insure during recessions, leading to a more sluggish recovery afterwards. The combination of high-risk exposure and under-insurance due to belief stickiness operates as a novel amplification mechanism over the business cycle"--Abstract, page ii.

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