By Arnold Kling
One of the most important facts about the modern recession is at all sectors of the labor market slacken at the same time. . .Each of the seven major sectors—even including government—were recruiting to fill far fewer positions at the trough of the recession. The softening of the labor market was economy-wide, not restricted to recession-prone sectors such as durables. Abraham and Katz (1986) were the first to recognize the significance of this feature of the economy, which rules out theories of recession that rest on reallocation from shrinking to expanding sectors.
My late teacher Bernie Saffran used to say that every growing economy needs a leading sector. That theory may explain this fact fairly well. If there is no sector that is expanding, then nobody quits their job, and nobody posts openings. So, even if government employment is not pro-cyclical, government job openings will be pro-cyclical.
Another way to put this theory is that when one sector is expanding there will be lots of turnover in other sectors. So job turnover should be highly procyclical. When there is no leading sector, job mobility slows down, and openings decline across the board.
If this theory is true, a recession happens when a leading sector collapses. The tech sector in 2001, the housing sector and finance in 2007. Hall dismisses this idea too casually, in my opinion.
Another pointer from Tyler