I generally agree with you. You're right that the economic environment can make hiring harder. There are more people looking for work, but the average quality of applicants is probably lower on the whole. The "extra" people are those laid off, who will be weaker on average than the general pool, and a lot of the talented people (who have a choice) are staying put until the hiring environment improves.

This: In fact, ask the references for additional references.

... is actually pretty damn scummy. The candidate has no way of knowing who his shadow references are, and could get unfairly burned and left with no idea why. It'd only be morally acceptable if you asked the candidate for permission to call these second-degree references, but that would defeat the purpose of snooping.