This paper examines the relationship between technology shocks and aggregate fluctuations in employment and productivity using data from the G7 countries. The author estimates conditional correlations of employment and productivity, decomposing them into technology and non-technology components. The results suggest that technology shocks lead to a negative comovement between productivity and employment, which is counterbalanced by a positive comovement generated by demand shocks. Specifically, positive technology shocks result in a persistent decline in employment, while measured productivity increases temporarily in response to positive demand shocks. These findings are consistent with a model featuring monopolistic competition, sticky prices, and variable effort, but are at odds with the standard Real Business Cycle (RBC) model. The paper also discusses the implications of these results for measures of short-run increasing returns to labor (SRIRL) and the relative ability of technology and demand shocks to explain the strong positive comovement in employment and output during the business cycle.This paper examines the relationship between technology shocks and aggregate fluctuations in employment and productivity using data from the G7 countries. The author estimates conditional correlations of employment and productivity, decomposing them into technology and non-technology components. The results suggest that technology shocks lead to a negative comovement between productivity and employment, which is counterbalanced by a positive comovement generated by demand shocks. Specifically, positive technology shocks result in a persistent decline in employment, while measured productivity increases temporarily in response to positive demand shocks. These findings are consistent with a model featuring monopolistic competition, sticky prices, and variable effort, but are at odds with the standard Real Business Cycle (RBC) model. The paper also discusses the implications of these results for measures of short-run increasing returns to labor (SRIRL) and the relative ability of technology and demand shocks to explain the strong positive comovement in employment and output during the business cycle.