The Employment and Displacement Effects of Job Counseling over the Business Cycle: Evidence from the US Unemployment Insurance System

The authors examine the effects of a job counseling program targeting unemployment insurance (UI) recipients in Nevada during both the Great Recession and a period characterized by a strong economy. The program reduced UI duration and improved participant employment and earnings in both periods. Effects can be partially attributed to participant exits before receiving services (moral hazard effects) and partly to exits after receiving services (service effects). Notably, moral hazard effects appear more important during a strong economy, whereas the value of services is more evident during a recession. The authors find no evidence that the positive effects of job counseling for participants can be attributed to displacement effects on nonparticipants.