The Weak Job Recovery in a Macro Model of Search and Recruiting Intensity

2016-09 | February 1, 2019

We show that cyclical fluctuations in search intensity and recruiting intensity are quantitatively important for explaining the weak job recovery from the Great Recession. We demonstrate this result using an estimated labor search model that features endogenous search and recruiting intensity. Since the textbook model with free entry implies constant recruiting intensity, we introduce a cost of vacancy creation, so that firms respond to aggregate shocks by adjusting both vacancies and recruiting intensity. Fluctuations in search and recruiting intensity driven by shocks to productivity and the discount factor help bridge the gap between the actual and model-predicted job filling rate.

Supplemental Appendix (pdf, 367 kb)

Article Citation

Leduc, Sylvain, and Zheng Liu. 2016. “The Weak Job Recovery in a Macro Model of Search and Recruiting Intensity,” Federal Reserve Bank of San Francisco Working Paper 2016-09. Available at https://doi.org/10.24148/wp2016-09

About the Authors
Sylvain Leduc
Sylvain Leduc is executive vice president and director of Economic Research at the Federal Reserve Bank of San Francisco. Learn more about Sylvain Leduc
Zheng Liu
Zheng Liu is a vice president and director of the Center for Pacific Basin Studies in the Economic Research Department of the Federal Reserve Bank of San Francisco. Learn more about Zheng Liu