The ZMP idea is gaining wider currency

… the gap between where unemployment stands now, at 9.1%, and full employment may not be as wide as it appears. But it also means more expansive monetary policy won’t be as effective in curing what ails the labor market, Andreas Hornstein, Thomas A. Lubik and Jessie Romero argue in a new paper from the Federal Reserve Bank of Richmond. “After a long period of unemployment, affected workers may become effectively unemployable,” the paper states. “If a large portion of long-term unemployed workers now finds it difficult to transition to employment, this suggests that the natural rate of unemployment may have increased.”

Here is more.  The paper itself has plenty of hypothesis-specific evidence.  For the pointer I thank David. M. Wessel.


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