Journal Article
Evaluating the role of labor market mismatch in rising unemployment
Abstract: Recent labor market trends have raised concerns that the unemployment rate is high not because employers are reluctant to hire but because they are unable to hire. These concerns, if true, would cast doubt on using monetary policy to stimulate the labor market, since it works by encouraging firms to hire more. Using a matching function approach, the author finds that a shock that makes it more difficult for firms to hire qualified applicants would by itself imply an unemployment rate of no more than 7.1 percent, much below the actual unemployment rate during the past two years. Hence, the recent patterns in unemployment and vacancy data do not necessarily rule out a role for monetary policy.
Keywords: Labor market; Unemployment;
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Bibliographic Information
Provider: Federal Reserve Bank of Chicago
Part of Series: Economic Perspectives
Publication Date: 2011
Volume: 35
Issue: Q III
Pages: 82-96