The Asymmetric Cyclical Behavior Of The Us Labor Market

The U.S. employment rate fluctuates asymmetrically over the business cycle: it contracts deeply and sharply during recessions, but it recovers slowly and gradually during expansions. By contrast, output features nearly symmetric fluctuations. I explain these facts using a search-and-matching model with worker heterogeneity in skills. The model identifies endogenous job separation and cyclical fluctuations in the composition of the unemployment pool as key driving forces of the asymmetric cyclical behavior of the U.S. labor market and output.