Justin Wolfers: ‘Labor Market Seems Dented, Not
There are two schools of thought
about the longer-term prospects for the labor market. The darker view is that
the Great Recession wrought permanent damage: The jobs that disappeared aren’t
easily replaced, and the skills of the jobless are a poor match for the jobs
You can see the problem by comparing the unemployment rate,
which is the proportion of workers without jobs, with the job vacancy rate
(sometimes called the job openings rate), which is the proportion of jobs
The statistical relationship between these, known as the
Beveridge curve, shows that a rise in one is associated with a fall in the
other. But in the wake of the Great Recession, both rose, suggesting that the
labor market had become worse at matching workers with vacant jobs. If this
shift in the Beveridge curve is permanent, the prospects for further reducing
unemployment are grim, as an elevated vacancy rate suggests that companies are
finding talent hard to find.
The sunnier view is that this is not a permanent shift, but
rather the natural course of a recession, which tends to cause short-run
counterclockwise loops in this unemployment-vacancies relationship. It’s a
sunnier view because it suggests that a continuing recovery will largely solve
our unemployment problem: The recovery will cause the labor market to loop back
toward its pre-recession Beveridge curve, leaving no lasting mark.
The past two years have been kind to this more optimistic
interpretation. The unemployment rate has fallen almost two percentage points
since March 2011, while the job vacancy rate hasn’t budged. Although some may
object that the decline in the unemployment rate overstates the cause for
optimism — after all, some of this is because of falling labor force
participation — the fact that the vacancy rate hasn’t risen at all over recent
years is still notable.
It is surely too early to draw strong conclusions, but continued
movements in this direction would suggest that the Great Recession hasn’t done
lasting damage, and that it’s possible for the unemployment rate to head back
toward 5 percent without the emergence of hiring bottlenecks.
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Businesses say they can't find qualified workers. Are they right?
Small business confidence has hit its highest point since
2007, according to a new survey from the National Federation of
That's great news, but one area where businesses aren't
feeling confident is in the qualifications of the people applying to their job
Today, 41 percent of small businesses say they have few or
no qualified applicants for the jobs they have open, up nearly 10 percentage
points from three years ago and 16 points up from 2009.
This still seems to indicate a pattern of increasingly
incompetent US workers. Altogether, 51 percent of businesses said they were
hiring in the last few months, so it would seem that most businesses that were
hiring had trouble finding anyone they deemed suitable.
That said, is it possible those businesses are
wrong? The question of whether there is a skills gap has been one of the
most hotly debated economics topics since the recession. Some experts
think so. Peter Cappelli, a Wharton School professor of management who is
one of the loudest voices in the skills gap debate, has said that it also might
be a function of businesses having unreasonable standards or being unwilling to
train new workers.
Wait for the perfect worker to fall into your lap, in other
words, and you'll be waiting forever. Try to mold an applicant into a perfect
worker, however, and you can start right now.
Paul Krugman also argues that the skills gap is
overblown — if there were a major gap, he has argued, they would be ramping up
wages in an effort to lure and retain the qualified applicants that are out
there, and there isn't much evidence of that happening.
So it could be that businesses need to ease up a bit and become
more open to hiring, or it could be that workers really are too underqualified
to work in the open jobs. Some experts have pointed to the large share of
long-term unemployed people as a sign of a gap — if those people who have
been out of work for six months truly had the skills, the thinking goes, they
would be employed right now.
Either way, businesses' hiring plans aren't exactly looking
sunny right now. While they've improved since March, they are still well below
where they were pre-recession. Right now, the difference between businesses
that say they will increase and decrease hiring is only 8 percentage points.
for the original article from Vox.