The asymmetric cyclical behavior of the U.S. labor market

The employment rate in the United States fluctuates asymmetrically over the business cycle: it contracts deeply and sharply during recessions, but it recovers slowly and gradually during expansions. By contrast, aggregate output exhibits nearly symmetric fluctuations about trend. I explain these facts using an equilibrium business cycle model with search frictions in the labor market and worker heterogeneity in productivity, featuring endogenous job destruction and fluctuations in labor composition. The model predicts that the response of the employment rate to shocks greatly varies over the business cycle; notably, it raises in recessions and declines in expansions.