IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this article

New evidence on cyclical and structural sources of unemployment

  • Chen, Jinzhu
  • Kannan, Prakash
  • Loungani, Prakash
  • Trehan, Bharat


    (Federal Reserve Bank of San Francisco)

We provide cross-country evidence on the relative importance of cyclical and structural factors in explaining unemployment, including the sharp rise in U.S. long-term unemployment during the Great Recession of 2007-09. About 75% of the forecast error variance of unemployment is accounted for by cyclical factors-real GDP changes (?Okun‘s Law?), monetary and fiscal policies, and the uncertainty effects emphasized by Bloom (2009). Structural factors, which we measure using the dispersion of industry-level stock returns, account for the remaining 25 percent. For U.S. long-term unemployment the split between cyclical and structural factors is closer to 60-40, including during the Great Recession.

(This abstract was borrowed from another version of this item.)

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Article provided by Federal Reserve Bank of San Francisco in its journal Proceedings.

Volume (Year): (2012)
Issue (Month): March ()
Pages: 1-23

in new window

Handle: RePEc:fip:fedfpr:y:2012:i:mar16:x:1
Contact details of provider: Postal:
P.O. Box 7702, San Francisco, CA 94120-7702

Phone: (415) 974-2000
Fax: (415) 974-3333
Web page:

More information through EDIRC

Order Information: Email:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Mario Fortin & Abdelkrim Araar, 1997. "Sectoral shifts, stock market dispersion and unemployment in Canada," Applied Economics, Taylor & Francis Journals, vol. 29(6), pages 829-839.
  2. Thomas, Jonathan M, 1996. "An Empirical Model of Sectoral Movements by Unemployed Workers," Journal of Labor Economics, University of Chicago Press, vol. 14(1), pages 126-53, January.
  3. Mary C. Daly & Bart Hobijn & Robert G. Valletta, 2011. "The recent evolution of the natural rate of unemployment," Working Paper Series 2011-05, Federal Reserve Bank of San Francisco.
  4. Prakash Loungani & Bharat Trehan, 1997. "Explaining unemployment: sectoral vs aggregate shocks," Economic Review, Federal Reserve Bank of San Francisco, pages 3-15.
  5. Valerie Cerra & Sweta Chaman Saxena, 2007. "Growth dynamics: the myth of economic recovery," BIS Working Papers 226, Bank for International Settlements.
  6. Benedikt Herz & Thijs van Rens, 2011. "Structural unemployment," Economics Working Papers 1276, Department of Economics and Business, Universitat Pompeu Fabra.
  7. Regis Barnichon & Michael Elsby & Bart Hobijn & Aysegul Sahin, 2011. "Which Industries are shifting the Beveridge Curve?," Tinbergen Institute Discussion Papers 11-157/3, Tinbergen Institute.
  8. Michael W. Elsby & Bart Hobijn & Aysegul Sahin, 2010. "The Labor Market in the Great Recession," NBER Working Papers 15979, National Bureau of Economic Research, Inc.
  9. Giovanni Gallipoli & Gianluigi Pelloni, 2008. "Aggregate Shocks vs Reallocation Shocks: an Appraisal of the Applied Literature," Working Paper Series 27_08, The Rimini Centre for Economic Analysis.
  10. Paul Beaudry & Franck Portier, 2004. "Stock Prices, News and Economic Fluctuations," NBER Chapters, in: Enhancing Productivity (NBER-CEPR-TCER-Keio conference) National Bureau of Economic Research, Inc.
  11. S. Lael Brainard & David M. Cutler, 1993. "Sectoral Shifts and Cyclical Unemployment Reconsidered," The Quarterly Journal of Economics, Oxford University Press, vol. 108(1), pages 219-243.
  12. Olivier Blanchard, 2005. "European Unemployment: The Evolution of Facts and Ideas," NBER Working Papers 11750, National Bureau of Economic Research, Inc.
  13. Christina D. Romer and David H. Romer., 1989. "Does Monetary Policy Matter? A New Test in the Spirit of Friedman and Schwartz," Economics Working Papers 89-107, University of California at Berkeley.
  14. John H. Cochrane, 1994. "Shocks," NBER Working Papers 4698, National Bureau of Economic Research, Inc.
  15. Daniel Aaronson & Ellen R. Rissman & Daniel G. Sullivan, 2004. "Can sectoral reallocation explain the jobless recovery?," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q II, pages 36-39.
  16. Loungani, Prakash, 1986. "Oil Price Shocks and the Dispersion Hypothesis," The Review of Economics and Statistics, MIT Press, vol. 68(3), pages 536-39, August.
  17. Olivier J. Blanchard & Lawrence H. Summers, 1986. "Hysteresis and the European Unemployment Problem," Working papers 427, Massachusetts Institute of Technology (MIT), Department of Economics.
  18. Jacob Funk Kirkegaard, 2009. "Structural and Cyclical Trends in Net Employment over US Business Cycles, 1949–2009: Implications for the Next Recovery and Beyond," Working Paper Series WP09-5, Peterson Institute for International Economics.
  19. Ben S. Bernanke & Alan S. Blinder, 1989. "The federal funds rate and the channels of monetary transmission," Working Papers 89-10, Federal Reserve Bank of Philadelphia.
  20. George L. Perry & Charles L. Schultze, 1993. "Was This Recession Different? Are They All Different?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(1), pages 145-212.
  21. Erica L. Groshen & Simon M. Potter, 2003. "Has structural change contributed to a jobless recovery?," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 9(Aug).
  22. Phelan, Christopher & Trejos, Alberto, 2000. "The aggregate effects of sectoral reallocations," Journal of Monetary Economics, Elsevier, vol. 45(2), pages 249-268, April.
  23. Christina D. Romer & David H. Romer, 2004. "A New Measure of Monetary Shocks: Derivation and Implications," American Economic Review, American Economic Association, vol. 94(4), pages 1055-1084, September.
  24. Toledo, Wilfredo & Marquis, Milton H, 1993. "Capital Allocative Disturbances and Economic Fluctuations," The Review of Economics and Statistics, MIT Press, vol. 75(2), pages 233-40, May.
  25. Nicholas Bloom & Max Floetotto & Nir Jaimovich & Itay Saporta-Eksten & Stephen Terry, 2013. "Really Uncertain Business Cycles," CEP Discussion Papers dp1195, Centre for Economic Performance, LSE.
  26. S. Lael Brainard, 1992. "Sectoral Shifts and Unemployment in Interwar Britain," NBER Working Papers 3980, National Bureau of Economic Research, Inc.
  27. James M. Nason & Shaun P. Vahey, 2006. "Interwar U.K. unemployment: the Benjamin and Kochin hypothesis or the legacy of “just” taxes?," FRB Atlanta Working Paper 2006-04, Federal Reserve Bank of Atlanta.
  28. Abraham, Katharine G. & Katz, Lawrence F., 1986. "Cyclical Unemployment: Sectoral Shifts or Aggregate Disturbances?," Scholarly Articles 3442781, Harvard University Department of Economics.
  29. Benjamin, Daniel K & Kochin, Levis A, 1979. "Searching for an Explanation of Unemployment in Interwar Britain," Journal of Political Economy, University of Chicago Press, vol. 87(3), pages 441-78, June.
  30. John H. Cochrane, 1990. "Univariate vs. Multivariate Forecasts of GNP Growth and Stock Returns: Evidence and Implications for the Persistence of Shocks, Detrending Methods," NBER Working Papers 3427, National Bureau of Economic Research, Inc.
  31. Robert G. Valletta, 1996. "Has job security in the U.S. declined?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue feb16.
  32. Lilien, David M, 1982. "Sectoral Shifts and Cyclical Unemployment," Journal of Political Economy, University of Chicago Press, vol. 90(4), pages 777-93, August.
  33. Marcello M. Estevão & Evridiki Tsounta, 2011. "Has the Great Recession Raised U.S. Structural Unemployment?," IMF Working Papers 11/105, International Monetary Fund.
  34. Regis Barnichon & Andrew Figura, 2011. "What drives matching efficiency? a tale of composition and dispersion," Finance and Economics Discussion Series 2011-10, Board of Governors of the Federal Reserve System (U.S.).
  35. repec:rim:rimwps:27-08 is not listed on IDEAS
  36. Loungani, Prakash & Rush, Mark & Tave, William, 1990. "Stock market dispersion and unemployment," Journal of Monetary Economics, Elsevier, vol. 25(3), pages 367-388, June.
  37. Bénédicte Vidaillet & V. D'Estaintot & P. Abécassis, 2005. "Introduction," Post-Print hal-00287137, HAL.
  38. Love, Inessa & Zicchino, Lea, 2006. "Financial development and dynamic investment behavior: Evidence from panel VAR," The Quarterly Review of Economics and Finance, Elsevier, vol. 46(2), pages 190-210, May.
  39. Campbell, Jeffrey R. & Kuttner, Kenneth N., 1996. "Macroeconomic effects of employment reallocation," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 44(1), pages 87-116, June.
  40. Nicholas Bloom, 2007. "The Impact of Uncertainty Shocks," NBER Working Papers 13385, National Bureau of Economic Research, Inc.
  41. Shin, Kwanho, 1997. "Inter- and Intrasectoral Shocks: Effects on the Unemployment Rate," Journal of Labor Economics, University of Chicago Press, vol. 15(2), pages 376-401, April.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:fip:fedfpr:y:2012:i:mar16:x:1. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Noah Pollaczek)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.