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This report is part of an analytical series using the 2001 Employers Skill Survey (ESS2001) (the statistical report is indexed at TD/TNC 69.214). The Exploring Local Areas, Skills and Unemployment (ELASU) analysis was designed to explore the relationship between relatively high levels of unemployment and hard-to-fill vacancies in some local areas, first identified in ESS1999 and subsequently referred to as an 'apparent paradox'. ELASU was multi-faceted, involving three main elements: an exploratory data analysis at local area level (report indexed at TD/TNC 73.363); multivariate econometric analysis of the relationship between vacancies and local unemployment (this current report); and qualitative interviews with employers who had experienced recruitment difficulties in areas where both levels of unemployment and vacancies were relatively high (report indexed at TD/TNC 73.365). A synthesis report is indexed at TD/TNC 73.367. This current report aims to identify the factors associated with the incidence and intensity of recruitment problems, including the influence of unemployment rates at the local level. The first part of the report describes the distribution of job vacancies of different kinds. The analysis reveals that the local area in which an establishment is located has a relatively significant effect on how common skill shortages are. The second part of the report investigates the unemployment-vacancy (UV), or Beveridge curve, relationship at the local level while accounting for the characteristics of the establishment and the local labour market which may impact upon this relationship. The evidence suggests that, in general, vacancy incidence and vacancy rates tend to be higher where local unemployment is lower, and vice versa. This relationship is weaker for hard-to-fill and skill-shortage vacancies which is evidence of skills mismatch, as these are the jobs that the unemployed are least likely to be qualified for and therefore least able to fill. From a policy perspective, the results indicate that differences in vacancies and local unemployment rates are more a consequence of the composition of employment and unemployment in the local area than any systematic failure of the local labour market to operate and adjust in the expected manner.