South By North Strategies, Ltd.

John Schmitt and Kris Warner of the Center for Economic and Policy Research deconstruct the debate over whether the current high level of unemployment is the result of a “structural” mismatch between worker characteristics and employer needs.

Structural unemployment refers to unemployment that reflects supply constraints in the economy: workers whose skills or geographic location don’t match with employers’ desires. Structural unemployment differs from cyclical unemployment, which is associated with fluctuations in aggregate demand related to swings in the business cycle.
…
The distinction between structural and cyclical unemployment has crucial implications for economic policy. If unemployment is “structural” then government policy that seeks to increase demand –low interest rates or fiscal stimulus, for example– will have little or no effect on the national unemployment rate and could even make matters worse by igniting inflation. If unemployment is “cyclical,” however, then expansionary macroeconomic policy can lower unemployment substantially with little or no risk of inflation.
…
We find little support for either of two arguments that suggest that structural unemployment has been on the rise.

Following a discussion of an analysis of data from the Census Bureau’s Displace Workers Survey (DWS), the authors conclude the following:

The DWS data suggest that the bursting of the housing bubble – the central cause of the economic downturn and the ensuing financial crisis – has not generated any noticeable increase in “structural unemployment.”
…
Construction workers have indeed suffered disproportionately in the downturn, but they have also been at least as successful in coping with the hostile labor market of recent years as workers displaced from other sectors. Construction workers’ skills are at least as well matched to the available jobs as workers displaced elsewhere in the economy.
…
The downturn in the housing market also appears to have slightly lowered the geographical mobility of displaced workers, but the economic effects are small, raising the pool of the unemployed by only a few percent (and the unemployment rate, by a much smaller amount).