Structural or Cyclical Unemployment?
By Arnold Kling
we look for evidence that structural change played a dominant role in the 2001 recession. Our investigation centers on two questions: Did temporary layoffs decline relative to permanent job losses in the recession? Were many of these lost jobs relocated to different industries?
They find evidence suggesting that the answer to both questions is “yes.”
Back in the 1950’s and 1960’s, a recession might have consisted of a decline in demand for housing and autos. Job losers in the automobile sector would be on temporary layoff, and job losers in both sectors would return to work in the industries where they had lost their jobs.
Today’s labor market is much more dynamic, with people undergoing transitions from one industry to another. The problem is that jobs are not being created fast enough in expanding industries to absorb people that are laid off from contracting industries.
For Discussion. Is structural unemployment less amenable to macroeconomic policy?