The impact of sectoral shifts in investment on unemployment in U.S. labor markets

Capital stock data for the U.S. economy are used to develop a measure of sectoral shifts in productive resources. Within the context of the creative destruction process, this measure provides a direct indicator of sectoral shifts in resource demands independent of aggregate fluctuations. Years with greater reallocations of capital have higher unemployment, a result consistent with the traditional sectoral shifts hypothesis. However, fluctuations in unemployment appear to be more strongly influenced by aggregate rather than sectoral shocks. Significant variation exists across demographic groups in the responsiveness of unemployment to aggregate fluctuations and sectoral shifts. The adverse impact of sectoral shifts is greater for males and members of the nonwhite labor force.