Structural changes in labor demand and unemployment in local labor markets

It seems quite clear that the U.S. economy in the late 1970s and early 1980s was exposed to an accelerated rate of structural change resulting from energy price shocks, increased international competition and technological change. It is of considerable interest, then, that previous attempts to examine structural unemployment in this period find that structural shifts in employment generally were not significant determinants of the unemployment rate. This paper revisits this issue using a measure of structural job shifts drawn from the Literature on establishment job creation and destruction. The results show that changes in the structure of labor demand across industry by establishment-size sectors had a statistically significant and empirically important positive effect on the unemployment rate in a sample of 200 metropolitan labor markets during the 1976 to 1984 period.