One feature of how the labor market looks different from before the Great Recession is captured in the Beveridge curve relationship, as shown here (vacancy rate vs. unemployment rate):
We’re interested in the Beveridge curve, in part because the relationship falls out of conventional Mortensen-Pissarides search models of the labor market. In that model, we think of low unemployment and high vacancies as capturing a tight labor market, and high unemployment and low vacancies a slack labor market. In the figure, the line joins points in the scatter plot sequentially in time, moving to the southeast as the recession worsens, then up and toward the northwest as the recovery proceeds. Early in the post-recession period, people were speculating as to whether the rightward shift in the Beveridge curve was due to cyclical factors (the Beveridge curve always shifts rightward in a recession) or some phenomenon related to mismatch in the labor market (the unemployed don’t have skills that match well with the posted vacancies). Perhaps surprisingly, the Beveridge curve has not shifted back, with the end of the Great Recession now more than 6 years in the rearview mirror. That would seem to put the kabosh on cyclical explanations for the phenomenon. But it’s not clear that mismatch fares any better in explaining the Beveridge curve shift. If that’s the explanation, why doesn’t the mismatch between the searchers and the searched-for go away?
Chosen excerpts by Job Market Monitor. Read the whole story at Stephen Williamson: New Monetarist Economics: The State of the Labor Market in the U.S..
Beveridge Curve “Shift” in US – There is no shift to begin with says Federal Reserve Bank of Cleveland
Observers have followed the Beveridge curve during the recession and the recovery to glean some insight into potential structural changes in the labor market. Whether or not a shift implies an actual structural change—specifically, a decline in the matching efficiency of the labor market—is still debatable. However, one thing is clear: there is no shift … Continue reading
Real Time Economics has been tracking the progression of the Beveridge Curve, named after the economist William Henry Beveridge, that tracks the relationship between the job openings rate and the unemployment rate. With so many jobs available, more people ought to be finding their way to work. An openings rate above 3% has historically meant … Continue reading
In an article on Thursday’s front page, I wrote about how long job vacancies are taking to fill, especially when you consider the abundance of unemployed workers. Economists have been thinking about this issue for a couple of years now thanks to a shift in what is known as the Beveridge Curve. No, the Beveridge … Continue reading
When trying to determine if high unemployment is being caused by weak demand or by a mismatch between jobs and the skills of job seekers, economists look at the Beveridge Curve. It represents the relationship between the unemployment rate and the job vacancy rate. On a simple chart, vacancies are on the vertical axis and unemployment … Continue reading
Skills Gap in US – Skill shortages are not a significant factor impeding current employment growth research finds
Consistent with the view that much of current unemployment must be structural rather than cyclical in nature, even as unemployment has been slow to fall from its recent high level, a number of reports have cited short- ages of skilled workers as a significant barrier to business expansion. A 2011 report by Deloitte and the … Continue reading
In addition to employment and unemployment figures, data on the efficiency of the labor market offer more clues to its health. One way to determine this is to examine the degree of labor mismatch occurring. The classic illustration demonstrating mismatch is the Beveridge curve, which shows an intuitive relationship between the rate of job vacancies … Continue reading
Economists often refer to three types of unemployment: “frictional”, “cyclical” and “structural”. Cold-hearted economists are not too worried about the first two, which refer to people moving between jobs and those temporarily laid-off during a downturn. The third kind refers to people who are excluded—perhaps permanently—from the labour market. In econo-speak, structural unemployment refers to … Continue reading
Something happened in 2008: the Beveridge Curve shifted to the right and stayed that way. That means employers aren’t hiring as many unemployed people as they should be, according to a pre-2008 view of the world. It is also one of the reasons the economy feels like it is still bad, even though the recession … Continue reading