The paper presents a dynamic general equilibrium model with labor market matching and endogenous job destruction rate determination. The model matches well with data on job creation and destruction. Cyclical fluctuations in the job destruction rate amplify the effects of productivity shocks on output and make these effects more persistent. The model shows that interactions between labor and capital markets, mediated by the rental rate of capital, play a central role in propagating shocks. The model considers two cases: perfect capital adjustment (PCA) and costly capital adjustment (CCA). In the PCA case, firms adjust capital after observing productivity shocks, while in the CCA case, firms adjust capital after observing only aggregate productivity shocks. The model shows that the CCA case leads to greater propagation of shocks due to the added negative effect of idle capital associated with severed relationships. The model is calibrated to labor market data, and simulations show that it matches well with empirical data on job flows. The model generates dynamic correlations between job creation, destruction, and employment that closely fit those observed in the data. Negative productivity shocks lead to a greater increase in job destruction than a decrease in job creation, resulting in a net employment reduction. The model shows that the RBC and Hansen models generate smaller magnification ratios than the CCA model, indicating that the CCA model generates more persistent output effects. The model also shows that the CCA model generates higher autocorrelations of output growth rates than the RBC model, which is consistent with the observed autocorrelation structure in U.S. data. The paper concludes that fluctuations in the job destruction rate are central to producing the impulse magnification and persistence underlying the model's results. The model shows that the interactions between the labor and capital markets, mediated by the rental rate of capital, play a central role in propagating shocks. The model also shows that the CCA case leads to greater propagation of shocks due to the added negative effect of idle capital associated with severed relationships.The paper presents a dynamic general equilibrium model with labor market matching and endogenous job destruction rate determination. The model matches well with data on job creation and destruction. Cyclical fluctuations in the job destruction rate amplify the effects of productivity shocks on output and make these effects more persistent. The model shows that interactions between labor and capital markets, mediated by the rental rate of capital, play a central role in propagating shocks. The model considers two cases: perfect capital adjustment (PCA) and costly capital adjustment (CCA). In the PCA case, firms adjust capital after observing productivity shocks, while in the CCA case, firms adjust capital after observing only aggregate productivity shocks. The model shows that the CCA case leads to greater propagation of shocks due to the added negative effect of idle capital associated with severed relationships. The model is calibrated to labor market data, and simulations show that it matches well with empirical data on job flows. The model generates dynamic correlations between job creation, destruction, and employment that closely fit those observed in the data. Negative productivity shocks lead to a greater increase in job destruction than a decrease in job creation, resulting in a net employment reduction. The model shows that the RBC and Hansen models generate smaller magnification ratios than the CCA model, indicating that the CCA model generates more persistent output effects. The model also shows that the CCA model generates higher autocorrelations of output growth rates than the RBC model, which is consistent with the observed autocorrelation structure in U.S. data. The paper concludes that fluctuations in the job destruction rate are central to producing the impulse magnification and persistence underlying the model's results. The model shows that the interactions between the labor and capital markets, mediated by the rental rate of capital, play a central role in propagating shocks. The model also shows that the CCA case leads to greater propagation of shocks due to the added negative effect of idle capital associated with severed relationships.