Academic journal article ABA Banking Journal

Our Two Cents on Structural Unemployment

Academic journal article ABA Banking Journal

Our Two Cents on Structural Unemployment

Article excerpt

In August, the unemployment rate rose to 9.6%, but it has been stubbornly around this elevated level or higher for well over a year. Economists and policymakers have been engaged in heated debates about the underlying cause for the sustained levels of joblessness. Much of the discussion has focused on structural unemployment. Structural unemployment suggests there is a fundamental mismatch in the number of people who want to work and the number of jobs that are available for their skills. The presence of structural unemployment means there are no easy fixes and any recovery in the labor market could be agonizingly slow.

Unemployment by industry

If we look at the number of unemployed workers to job openings by industry, we find the ratio of job seekers seems to be in line with the previous recovery. The construction industry, however, is a clear outlier with more than 20 unemployed workers qualified for each job opening, which is almost twice the number of job seekers from the previous expansion. Even the manufacturing sector, which was also hard hit, remains roughly in line with the previous expansion at almost seven unemployed workers per job opening. This suggests there are signs of structural unemployment in the construction industry where workers' skills are not easily adaptable elsewhere. Another way to determine whether skills match is to compare the peak unemployment rate in the current recession to the 2001 recession. Again, the construction sector is an obvious outlier with the peak unemployment rate reaching a staggering 27%, which is almost double the peak rate in the previous downturn. …

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