How Household Debt Contributes to Unemployment: Mian and Sufi describes their research efforts to pinpoint the cause of the high level of unemployment.
The weakness in household balance sheets and the associated pullback in spending are directly responsible for the lion’s share of employment losses in the U.S. economy. This deficiency remains the most significant impediment to a robust recovery.
Our research suggests that 65 percent of the job losses from 2007 to 2009 came from the drop in household spending induced by the collapse in home prices and its effect on a highly levered household sector.
So much for uncertainty in regulation being the cause of the problem.
The authors used some innovative techniques to use county by county comparisons to tease out their conclusion from the available statistics.
As in any statistical study, we have to await peer review of their methods to make sure that there is no flaw in how they interpret the data.
The one weakness I could detect, if it is a weakness, is the clever separation of jobs into the tradable and non-tradable categories. There may be second order effects in this categorization that they did not correct for.
The Calculated Risk blog has an article Research: How Household Debt Contributes to Unemployment that provides more references that I have not yet checked.
Paul Krugman in his article Demand, Demand, Demand does endorse the results I have quoted.