The classical assumption that labor markets clear makes it difficult for that model to explain recessions.

Question

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The classical assumption of labor market clearing means that in the long run, supply and demand for labor will always balance out at the equilibrium wage rate. This assumption implies that there can be no involuntary unemployment in the economy. However, in reality, there can be situations where there is a surplus of labor (i.e. unemployment) and wages may not adjust quickly enough to clear the labor market. This makes it difficult for the classical model to explain recessions as it relies on the assumption of full employment.

The Classical Assumption That Labor Markets Clear Makes It Difficult