Does David Andolfatto really think that the pace at which firms hired new workers and the speed with which unemployed workers found jobs sped up as the recession hit?
In a typical quarter, roughly 2,000,000 workers per month exited unemployment into employment. When the recession hits... look at what happens to the UE flow. While it does not rise as sharply as the EU flow, it rises nevertheless…and continues to remain high even as the EU flow declines. Is this surge in job finding rates among the unemployed consistent with the deficient demand hypothesis?
Wow. Just wow.
The pace of new hires falls by 30% as the recession hits: firms just don't see the demand to justify hiring at the normal pace.
But when firms hire, they hire not just the unemployed but the employed and the not-in-the-labor-force as well. With more than twice as many unemployed, a greater share of new hires now come from the currently unemployed than used to. But that does not mean any "surge in job finding rates among the unemployed." The rise in the average duration of unemployment tells us that there has been no surge in the job finding rates among the unemployed--rather the reverse.
This is not rocket science, people...