STOCK MARKET WATCH -- Monday, 11 February 2013

[Demeter]

46. Why the Unemployment Rate Is So High By LAURA D’ANDREA TYSON

http://economix.blogs.nytimes.com/2013/01/11/why-the-unemployment-rate-is-so-high/

...Despite anecdotes about how employers cannot find workers with the skills they need, there is little evidence that the unemployment rate remains elevated because of mismatches between the skill requirements of available jobs and the skills of the unemployed. When the recession hit in 2008, unemployment rates soared in every industry. As usual during recessions, mismatches between employer needs and worker skills also increased temporarily, reflecting greater churn in the labor market as workers were forced to move across industries and occupations. But industrial and occupational mismatch measures are now back to their prerecession levels, indicating that the overall unemployment rate is high because unemployment rates remain high across all industries and most skill groups, not because of a growing skills gap relative to the gap that existed before the recession.



The unemployment rates for all workers at all education levels jumped during the recession and have not recovered to prerecession levels. Even before the recession, the unemployment rates for workers with a high-school education or less were much higher than those for workers with a college education or higher. And there were high vacancy rates and low unemployment rates for professional occupations, while many service and blue-collar occupations had low vacancy rates and high unemployment rates. These structural differences persist but are no larger than they were before the recession...Increases in educational attainment levels and effective training programs would ameliorate such differences and the growing wage inequality they have generated. They would also facilitate the movement of workers among industries and occupations, making the labor market work better and reducing the structural unemployment rate from industrial and occupational mismatches. Alas, state funds for such programs have been slashed and federal funds will probably get an additional haircut later this year, even if the debilitating cuts in the sequester are averted as part of a long-run budget deal.

Another feature of the current recovery is the long duration of unemployment for many workers. At the end of last year, 4.8 million Americans were unemployed for 27 weeks or more, and their share in the total number of unemployed workers fell to 39 percent after peaking at 45.5 percent in March 2011 and exceeding 40 percent for 31 consecutive months. The previous peak was a far lower 26 percent in 1983, at a time when the unemployment rate was about as high as it is now.



Moreover, the number of workers who are grappling with long-term job loss is probably far larger than the official number of long-term unemployed, as it does not include 1.1 million discouraged workers who want a job but are not currently looking for work, and many of the 1.7 million workers who have joined disability rolls because they cannot find a job. Why is the long-term unemployment problem so much more severe in this recovery? Part of the answer lies in the fact that the loss of jobs in the 2008-9 recession was more than twice as large as in previous recessions and the pace of gross domestic product growth during the recovery has been less than half the average of previous recoveries...

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