Friday, July 16, 2010

The Beveridge Curve for Unemployment

There's been a lot of chatter about how this particular recession has deviated from the normal "Beveridge curve", which relates the number of people unemployed-but-looking-for-jobs with the number of job openings. This originated here, I believe:
The number of job openings is actually reasonably robust right now, but the labor market isn't clearing.
A number of reasons that have been presented:
1) Extended unemployment benefits mean that people are overly selective about what jobs they take.
2) A sectoral shift in US production, where construction workers aren't trained enough to be nurses, for example
3) Businesses used the recession to upgrade critical systems to cut costs, but these critical systems are largely more sophisticated than older ones and thus require more educated people to operate. The bulk of the unemployed are less educated, and thus aren't a fit for the positions.
4) People are underwater in their mortgages, or defaulted on their mortgages, and thus aren't able to move to another place for a new job. Thus, people are limited in the jobs they could take (another reason to LET THE HOUSING MARKET CLEAR).
5) Openings are for prospective future demand, not current demand, and current demand is low enough that employers can afford to wait and be choosy.
Another I thought of is that
6) Companies are posting for jobs they laid off so they have the ability to rehire quickly, but they don't intend filling the jobs anytime soon, or perhaps are waiting to see if they want to even bother rehiring in the US.
It's almost certainly a combination of all of them, but it is something to keep an eye on.

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