Lucas Cost of Business Cycles
The Lucas model does not address at all the points that you address of people losing jobs, as it utilizes just one agent that simply has a perfectly steady (perhaps growing at a constant rate) consumption path. A model with heterogeneous agents where they have the possibility of losing their jobs and having some periods with, supposedly, very low consumption, would give a much higher cost of business cycles.

Further, in a paper using robust preferences Sargent and some coauthors find that if the agent has fear that his model of where income fluctuations are drawn from is misspecified, the costs of business cycles are much higher.