and national levels. this will allow each member of our union to achieve a sustainably high level of employment. the stakes for our monetary union are high. without permanent cross - country transfers, a high level of employment in each country is essential for the long - term cohesion of the euro area. given the very high costs if the cohesion of the union is threatened, all countries should have an interest in achieving this. * * * no one in society remains untouched by a situation of high unemployment. for the unemployed themselves, it is often a tragedy which has lasting effects on their lifetime income. fo r those in work, it raises job insecurity and undermines social cohesion. for governments, it weighs on public finances and harms election prospects. and unemployment is at the heart of the macro dynamics that shape short - and medium - term inflation, meaning it also affects central banks. indeed, even when there are no risks to price stability, but unemployment is high and social cohesion at threat, pressure on the central bank to respond invariably increases. 1. the causes of unemployment in the euro area the key issue, however, is how much we can really sustainably affect unemployment, which in turn is a question – as has been much discussed at this conference – of whether the drivers are predominantly cyclical or structural. as we are an 18 country monetary union this is necessarily a complex question in the euro area, but let me nonetheless give a brief overview of how the ecb currently assesses the situation. bis central bankers ’ speeches figure 1 change in the unemployment rate since 2008 – the euro area and the us the long recession in the euro area the first point to make is that the euro area has suffered a large and particularly sustained negative shock to gdp, with serious consequences for employment. this is visible in figure 1, which shows the evolution of unemployment in the euro area and the us since 2008. whereas the us experienced a sharp and immediate rise in unemployment in the aftermath of the great recession, the euro area has endured two rises in unemployment associated with two sequential recessions. from the start of 2008 to early 2011 the picture in both regions is similar : unemployment rates increase steeply, level off and then begin to gradually fall. this reflects the common sources of the shock : the synchronisation of the financial cycle across advanced economies, the contraction in global trade following the lehman failure, coupled with a strong correction of asset prices – notably houses – in certain jurisdictions. from

##izing of the previously altavilla, carlo, domenico giannone and michele lenza ( 2014 ). “ the financial and macroeconomic effects of the omt announcements, ” ecb working paper no. 1707. bis central bankers ’ speeches overblown construction sector ( figure 4 ), which, consistent with experience in the us, tends to lower match efficiency. 3 by the end of 2013, the stock of long - term unemployed ( those unemployed for a year or more ) accounted for over 6 % of the total euro area labour force – more than double the pre - crisis level. figure 4 evolution of euro area employment by sector and educational level another important explanation seems to be a lack of redeployment opportunities for displaced low - skilled workers, as evidenced by the growing disparity between the skills of the labour force and the skills required by employers. analysis of the evolution of skill mismatch 4 suggests a notable increase in mismatch at regional, country and euro area level ( figure 5 ). as the previous figure shows, employment losses in the euro area are strongly concentrated among low skilled workers. u. s. industry - level studies find that a large part of the decline in match efficiency is driven by the low level of job openings and hires per vacancy in the construction sector – see e. g. barnichon, regis, michael w. l. elsby, bart hobijn and aysegul sahin ( 2012 ) “ which industries are shifting the beveridge curve? ” monthly labor review, june 2012, 25 – 37 ; davis, steven j., r. jason faberman, and john c. haltiwanger “ recruiting intensity during and after the great recession : national and industry evidence, ” american economic review : papers and proceedings. based on skill mismatch indexes computed as the difference between skill demand ( proxied by educational attainments of the employed ) and skill supply ( proxied by the educational attainments of the labour force or unemployed, respectively ). see ( forthcoming ) ecb occasional paper entitled “ comparisons and contrasts of the impact of the crisis on euro area labour markets ’ ’. bis central bankers ’ speeches figure 5 skill mismatch indices for the euro area all in all, estimates provided by international organisations – in particular, the european commission, the oecd and the imf – suggest that the crisis has resulted in an increase in structural unemployment across the euro area, rising from an