Is Current Unemployment Due To Lack Of Demand Or A Skills Mistatch?

Not everyone agrees on the causes of today's current unemployment problem. Broadly speaking, more liberal leaning economist argue that unemployment is due to a lack of aggregate demand. Their more conservative counterparts typically argue that the current unemployment problem is due mainly to a skills mismatch between the jobs that are available and the people looking for work.

Dylan Matthews has a piece on the reasons for current unemployment problem. He writes:

If this theory is true, then current unemployment is due to a skills mismatch — people don’t just have the skills to do the jobs we need them to do. The solution to this is to increase education so that people can handle those jobs, rather than to increase demand. There’s one problem: This isn’t the main reason unemployment is high now. A new paper (pdf) from New York Fed economists Aysegul Sahin, Joseph Song, Giorgio Topa and Giovanni L. Violante finds that a skills mismatch is responsible for at most a 1.5 percentage point increase in the unemployment rate during the recession. Given that unemployment shot up by about 5 points, that leaves the other 3.5 percentage points explained by a shortfall in demand. What’s more, the effects of skill mismatch only really appear during the recession.