During the past few years, economists have been debating how much of the increase in
unemployment since the start of the 2007-2009 recession is due to reduced demand for goods and
services compared with compositional changes entailing worker reallocation across industries and
areas.1
In other words, how much of the increase in the official unemployment rate from 5.0% at
the recession’s outset in December 2007 to a peak of 10.0% in October 2009 was cyclical
unemployment and how much was structural unemployment?