Mismatch in the US Labor Market

Not a big deal say Aysegul Sahi, Joseph Song, Giorgio Topa, and Giovanni Violante (mostly of the NY Fed) in their "Measuring Mismatch in the U.S. Labor Market" (PDF):

This paper measures mismatch in the U.S. labor market. Mismatch is defined as the distance between the observed allocation of unemployment across sectors and the optimal allocation chosen by a planner who can freely move labor across sectors. We show that, in a rich dynamic stochastic economic environment, the planner's optimal allocation is dictated by a "generalized Jackman-Roper (JR) condition" where (productive and matching) efficiency-weighted vacancy-unemployment ratios are equated across sectors. We develop this condition into mismatch indexes that allow to quantify how much of recent rise in U.S. unemployment is associated to an increase in mismatch. We use two sources of cross-sectional data on vacancies, JOLTS and HWOL, together with unemployment data from the CPS for 2001-2010. We find that increased mismatch accounted for less than one percentage point of the rise in the unemployment rate from the start of the recession to 2010.

The difficulty of this kind of empirical work highlights in my view the need for monetary policy to be guided by clear rules.