Business Cycles and Aggregate Labor-Market Fluctuations

This paper describes some of the recent findings about the cyclical behavior of the aggregate labor market and its relation to the overall business cycle. The basic theoretical framework is the neoclassical growth model with its central component: the aggregate production function. After listing the main empirical regularities related to the labor input, the paper presents some of the developments in theory and measurement that have been motivated by these facts. Examples are the roles of household production, of the differences in cyclical behavior of workers with different skills, and of the fact that labor-input changes take the forms of both employment and hours-per-worker movements.