Minneapolis Fed president Narayana Kocherlakota addressed structural unemployment and its resistance to monetary policy in a speech today. Noting that unemployment increased at the same time that the job openings rate rose, Kocherlakota concluded,
What does this change in the relationship between job openings and unemployment connote? In a word, mismatch. Firms have jobs, but can’t find appropriate workers. The workers want to work, but can’t find appropriate jobs. There are many possible sources of mismatch-geography, skills, demography-and they are probably all at work. Whatever the source, though, it is hard to see how the Fed can do much to cure this problem. Monetary stimulus has provided conditions so that manufacturing plants want to hire new workers. But the Fed does not have a means to transform construction workers into manufacturing workers…. Most of the existing unemployment represents mismatch that is not readily amenable to monetary policy.
The bottom line? Kocherlakota expects unemployment to hover above 8 percent into 2012.