Structural Unemployment

Prof. Mankiw gave us a nice reminder of structural unemployment on Monday. From his post…

As my colleague Erik Hurst and his co-authors have shown, states that had the largest rise in construction as a share of GDP in 2000-2006 tended to have had the greatest contraction in that industry in 2006-2009. These states also tended to have the largest rise in unemployment rates between 2006 and 2009.

[Later he points out...]

Hurst estimates that this “structural” unemployment may account for up to three percentage points of total unemployment. In other words, were it not for construction, the US unemployment rate would be 6.5% – a far healthier situation than today.

Structural unemployment speaks to changes in how people are employed – what industries are hiring, what skills are needed, and where the jobs are geographically.

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