But at the very end, in his conclusion, he misses out:
The argument that unemployment is due to a skills mismatch leads to very different conclusions about economic policy than the view that the main cause of unemployment is insufficient demand.
The former sees the problem as being with workers while the latter view focuses on the need for economic policy to increase demand.
While many people in national policy debates have been anxious to put forward the skills mismatch argument, it is difficult to find evidence that supports this position. The evidence is overwhelmingly consistent with the simple view that the collapse of the housing bubble has led to a large shortfall in demand. In this context, measures that focus on improving skills will have little effect on overall employment.
The evidence clearly does NOT show that. By the time demand took a big hit, when the Fed let nominal spending (NGDP) tank, the collapse of the housing bubble, which brought residential construction employment down with it, had already run most of its course. The charts illustrate (monthly NGDP from Macroeconomic Advisers).
New York Fed Dudley has conceded that the sluggish recovery is due to monetary policy. Now he only has to acknowledge that the “Great” attached to the recession was also the result of inadequate monetary policy.