Aggregate Recruiting Intensity

Abstract

We develop an equilibrium model of firm dynamics with random search in the labor market where hiring firms exert recruiting effort by spending resources to fill vacancies faster. Consistent with microevidence, fast-growing firms invest more in recruiting activities and achieve higher job-filling rates. These hiring decisions of firms aggregate into an index of economywide recruiting intensity. We study how aggregate shocks transmit to recruiting intensity, and whether this channel can account for the dynamics of aggregate matching efficiency during the Great Recession. Productivity and financial shocks lead to sizable pro-cyclical fluctuations in matching efficiency through recruiting effort. Quantitatively, the main mechanism is that firms attain their employment targets by adjusting their recruiting effort in response to movements in labor market slackness.

Measuring Job-Finding Rates and Matching Efficiency with Heterogeneous Job-Seekers

“…The adjustment for recruiting intensity eliminates some of the downward trend in both indexes, but does not affect the overall conclusion of the paper. Gavazza et al (2016) conclude that, to a fair approximation, recruiting intensity satisfies their equation (29):…”

“…In principle, vacancies should be disaggregated to recognize their heterogeneity and likely variations in recruiting intensity. Davis, Faberman and Haltiwanger (2013) and Gavazza, Mongey and Violante (2016) are important recent studies of that heterogeneity. In Appendix D, we show that incorporation of recruiting intensity as modeled in those papers has essentially no effect on our conclusions, though it has some effect on the trend rate of decline in efficiency.…”

Rational Inattention in Hiring Decisions

“…In closely related work, Gavazza et al (2017) consider a model of costly recruiting effort and find that productivity shocks together with financial shocks can explain fluctuations in aggregate matching efficiency. Our model does not feature an explicit cost of recruiting.…”

Recall and Unemployment

“…This share of the flow into unemployment, which we will refer to as the "recall rate," significantly exceeds the fraction of the same EU flow that is due to temporary layoffs (TL), namely, workers who report being laid off with a recall date or expectation. 2 In other words, recalls are more pervasive than TL. The reason is that, even within the group of permanently separated (PS) workers-those who lose their job with no indication of a recall, and start looking for another job-about 20 percent are eventually recalled by their last employer.…”