Since it´s been hard to get aggregate evidence for “structural” causes of unemployment, David Andolfatto tries to do so at a more disaggregated level, comparing changes in job vacancy rates and changes in unemployment at the MSA (Metropolitan Statistical Area) level. As the bible says: “Search and Ye Shall Find”. And Andolfatto is confident he did:

What does the second chart show? First, it is generally believed that unemployment rates across all major U.S. population centers increased during and since the past recession, and the chart corroborates this impression. It is also generally presumed that vacancy rates decline during an economic downturn, but the chart shows this is not necessarily the case. Roughly half of the sampled MSAs show the classic Beveridge relationship but the remainder do not. In this latter group, an increase in the unemployment rate is associated with an increase in the job vacancy rate. One inference that could be made here is that for this latter group, local unemployment rates are more the product of structural, rather than cyclical, factors. Whether a recession is the product of cyclical or structural factors has some bearing on the optimal policy response. Monetary policy, in particular, is relatively well equipped to deal with an aggregate cyclical downturn. But it is not clear how monetary policy might be used to reduce local unemployment rates where recruiting intensity is high but the right kind of worker is hard to find. In these latter locations, localized fiscal policies may prove a direct and useful tool.

But if you click on the chart link above you´ll notice an “asymmetry”. Most of the MSAs where vacancy rates increase, this increase is very small, maybe insignificant. Note, for example the almost imperceptible vacancy rate increase in the New York, Louisville, Memphis and Nashville MSAs. Only the Detroit MSA has a vacancy rate increase that is a bit over 0.5 percentage point.

Things are very different in the bottom part of the chart where most MSAs experienced a strong drop in vacancy rates.

As the CBO recognizes, there´s always a structural element present in the process, but lack of demand remains the principal reason for the dire employment situation and if this goes on for long it will “create” structural problems down the line.

I find it strange that so much effort is dedicated to finding reasons for NOT using monetary policy. Maybe that´s because many have been indoctrinated on the “money always spells inflation” meme.