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This episode aired on Bloomberg TV on Jul 18, 2013

Beveridge Curve

Q. So we had a mixed-bag job report this morning, and “beveridge curve” tell us about one really important and continuing trend in the jobs data…

A Right. … It’s named after an economist, not a drink. It shows the relationship between job vacancies and the unemployment rate, and it usually follows a pretty standard slope: the lower the unemployment rate, the higher the number of vacancies.

Q. So let’s bring up a graph of actual data over the past few years and see what it shows…

A. Right, let’s do. And you’ll see that the more recent data points– in red– aren’t at all on the same line as the older data points. Now, those older ones show the expected pattern– higher unemployment meant fewer vacancies: no jobs. More recent data shows something different and interesting: both high unemployment and many job openings… The job market is not “efficient”.

Q. So what do the economists make of this?

A. As you can guess, different ones say different things. Some intially claimed this was caused by the extension of unemployment benefits– that people were diseincented from looking for work. And that actually may be a bit of it. But more recently, the thought is that we really do have a structural unemployment problem, a mismatch between the skills out of workers have, and the skills the new jobs need.

Q. So that unemployed construction workers can’t exactly get a job writing software for Microsoft…

A. Yep. And even as traditional blue collar jobs come back, like in manufacturing, they’re requiring more and more education and skills to operate more sophisticated machinery and robots.

Q. So how much of the puzzle does the skills gap explain?

A. Frankly, no one is quite sure– not all of it, or you’d see more pressure on wage levels as employers bid for the few qualified candidates. So another factor seems to be that employers are listing jobs, but then not quite pulling the trigger on hiring them… they feel that in a soft jobs market there’s no rush, and they still want to see whether the recovery is real before committing…