John Taylor argues that the most effective way to reduce unemployment is to raise investment as a share of GDP. His blog post is Higher Investment Best Way to Reduce Unemployment, Recent Experience Shows. He argues for a negative relationship between unemployment and investment. But Paul Krugman isn't having a bar of this. See here and here. What is the role of housing in all of this? Taylor responds in Investment and Unemployment: A Reply. Justin Wolfers thinks this looks like fun and comments here and here. Taylor responds here.
What started all of this is this graph showing a negative relationship between unemploment and investment.
The question is which way does causation run? From investment to unemployment or the other way round? Or is the relationship due to some other third factor?