Comment

Abstract

Hall and Kudlyak start with the observation that in the typical US business cycle recovery, unemployment declines slowly but reliably from a high point at the end of a business cycle contraction. They show that the direct effect of job loss at the onset of the recession cannot account for the persistently high unemployment rate during the recovery. The recession’s effects on the labor market go beyond the job losses that mark the beginning of recessions.Hall andKudlyak then exploremodelswhere there is feedback from high unemployment to the forces driving job creation. These mechanisms include higher recruiting costs early in the recovery, congestion in recruitment, externalities from recruitment selection, lower matching efficiency, impaired profitability of new matches, and persistently higher separation rates. These models imply that the recovery of aggregate unemployment is slower than the rate at which individual unemployed workers find new jobs. The paper tackles an interesting and eternal topic. Understanding how the labormarket recovers from recessionary shocks and howfirms recruit and search for workers helps us in shaping policy response to recessionary shocks. This comment reviews and interprets Hall and Kudlyak’s findings and suggests new directions of research.