The dynamics of wealth accumulation and distribution are crucial for understanding the effects of labor market frictions and macroeconomic shocks on workers’ welfare. In this paper, we study how workers’ search behavior and wealth accumulation interact in a labor market with matching frictions. We consider a continuous-time wealth accumulation model in which risk-averse workers move back and forth between employment and unemployment and can save and borrow at a risk-free rate. Workers can decide how intensely they search for a job when unemployed by comparing the expected surplus of a job match and the search disutility. We show that search effort is negatively related to wealth and that precautionary savings are built up during employment spells and run down during unemployment spells. We numerically solve the associated system of Hamilton-Jacobi-Bellman and Kolmogorov-Forward equations and use these to study the relation between model parameters, the stationary wealth distribution, and various equilibrium aggregate variables of the economy. In particular, we find that equilibrium levels of unemployment benefit, interest rate, and tax rate do not respond monotonically to matching elasticity to unemployment. Finally, we study the impulse response to the propagation of technology shocks in the short and long run.