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Federal Reserve Bank of San Francisco
Working Paper Series
The slow job recovery in a macro model of search and recruiting intensity
Sylvain Leduc
Zheng Liu
Abstract

Despite steady declines in the unemployment rate and increases in the job openings rate after the Great Recession, the hiring rate in the United States has lagged behind. Significant gaps remain between the actual job filling and finding rates and those predicted from the standard labor search model. To examine the forces behind the slow job recovery, we generalize the standard model to incorporate endogenous variations in search intensity and recruiting intensity. Our model features a vacancy creation cost, which implies that firms rely on variations in both the number of vacancies and recruiting intensity to respond to aggregate shocks, in contrast to the textbook model with costless vacancy creation and thus constant recruiting intensity. Cyclical variations in search and recruiting intensity drive a wedge into the matching function even absent exogenous changes in match efficiency. Our estimated model suggests that fluctuations in search and recruiting intensity help substantially bridge the gap between the actual and model-predicted job filling and finding rates in the aftermath of the Great Recession.


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Sylvain Leduc & Zheng Liu, The slow job recovery in a macro model of search and recruiting intensity, Federal Reserve Bank of San Francisco, Working Paper Series 2016-9, 08 May 2016.
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DOI: 10.24148/wp2016-09
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