New Evidenceon Cyclical and Structural Sources of Unemployment

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.Unemployment;Stock markets;Economic recession;External shocks;Global Financial Crisis 2008-2009;unemployment rate, long-term unemployment, long-term unemployment rate, employment, unemployment rates, structural unemployment, duration of unemployment, unemployed, unemployment duration, average duration of unemployment, aggregate unemployment, short-term unemployment, cyclical unemployment, long term unemployment, unemployment spells, unemployment increases, high unemployment, employment growth, rate of unemployment, labor demand, unemployment durations, total unemployment, unemployment forecast, natural rate of unemployment, unemployment declines, equilibrium unemployment, unemployed workers, sectoral employment, beveridge curve, unemployment problem, employment conditions, unemployment outcomes, average unemployment, equilibrium unemployment rates, structural employment, cyclical employment, employment trends, persistent unemployment, employment growth rates, net employment