Monetary or fiscal stimulus can help only if unemployment is cyclical; otherwise, if unemployment is structural expansionary policies will lead only to inflation. Careful recent analyses indicate that unemployment is mainly cyclical in the US

Ethan Ilzetzki and Jonathan Pinder examine the US economic woes since the beginning of the recession and the policy response aimed at fighting unemployment. They find that monetary or fiscal stimulus can help only if unemployment is cyclical and that unemployment (now at 7.8%) is indeed mainly cyclical. The examination of the US experience provides valuable insight for the UK experience, currently undergoing a tough austerity programme with an unemployment rate hovering at 7.9%.