This paper studies how occupational segregation - the sorting of workers across occupations based on their demographic characteristics - affects the allocation of talent in a competitive labour market. A model of occupational choice is proposed in which workers must rely on their social contacts to acquire job vacancy information. Workers are assumed to differ in terms of their cost of specialising in different occupations and their productivity on the job. In this environment, network effects in job search can lead to occupational segregation in equilibrium. While occupational segregation implies benefits in terms of job-finding probability, it may also engender significant allocative inefficiencies. Efficient and equilibrium outcomes differ due to a network externality that leads workers to segregate too little, and a pecuniary externality that leads workers to segregate too much. Which effect dominates is shown to depend on the elasticity of wages to changes in the degree of occupational segregation.