Structural Unemployment: Does Anyone Care About Evidence?

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Wednesday, 09 February 2011 05:41

Most news outlets have given considerable space in recent weeks to the argument that the U.S. economy suffers from structural unemployment. This means that the reason that people are unemployed is that they lack the skills necessary for the available jobs. This contrasts with the idea that the unemployment is primarily cyclical, which means that it is the result of a lack of demand in the economy. This issue is central to our understanding of the economy since it effectively raises the question of whether we blame unemployed workers for lacking the skills needed to get a job or we blame policymakers for lacking the skills needed to run the economy.

The evidence for the structural unemployment argument has mostly been anecdotal -- interviews with managers who complained that they could not hire people at the wage they wanted to pay. The news reports on structural unemployment have not sought to look for the sort of data that would support this view of the economy, such as evidence of rapidly rising real wages for some occupations or a large increase in job openings.

One item that had been cited as supporting the structural unemployment view was the modest increase in the number of job openings from the trough of the downturn in the summer of 2009. Job openings had risen by close to a third from their low, although they were still down by more than 25 percent from their pre-recession level. Openings also never rose above 25 percent of the number of unemployed.

In any case, given the importance of the job openings number for those making the structural unemployment argument, it might have been expected that the release of data from the Labor Department showing that the number of openings had fallen for the second consecutive month would have gotten considerable attention. Instead, it merited just a few small pieces or blognotes.