This dissertation explores persistent unemployment dynamics in the U.S., alternative explanations for this phenomenon and potential policy implications. Chapter 1 develops and estimates a general equilibrium rational expectations model with search and multiple equilibria where aggregate shocks have a permanent effect on the unemployment rate. If agents' wealth decreases, the unemployment rate increases for a potentially indefinite period. This makes unemployment rate dynamics path dependent as in Blanchard and Summers (1987). I argue that this feature explains the persistence of the unemployment rate in the U.S. after the Great Recession and over the entire postwar period.Chapter 2 conducts an empirical exercise to analyze which assumptions...