It’s all about job vacancies in relation to the percentage of unemployed persons.
To start, this chart shows the current relationship between the unemployment rate (red) and the inverted rate of nonfarm job openings (blue):
Photo: FRED via Paul Krugman
What’s important here is that the percentage of unemployment far exceeds the rate at which positions are becoming available, at least relative to the last decade. Although the rate of job openings is increasing and unemployment is falling in tandem, the sustained difference between the two rates suggests that there just aren’t enough jobs for all the available workers—and this is not just a momentary thing.
While the data from the St. Louis Fed doesn’t go back farther than 2001, Krugman nonetheless points to the following chart, which appears to show that this relationship between unemployed persons and job openings is abnormally high:
Photo: Paul Krugman
While the ratio of available jobs to the unemployed started the decade at normal levels, the ratio of unemployment to vacancies in the financial crisis was pretty much unprecedented. But most importantly, the Beveridge curve showing this relationship in the last decade (orange) has shifted markedly closer to the graph’s origin since the 1990s (blue) which, in turn, shifted closer to the origin since the 1980s (yellow).
What that means is that the economy has become significantly more efficient. There are literally fewer people needed for the same number of jobs, and the curve doesn’t appear to be shifting back towards inefficiency quickly enough to change that.
A fundamental structural change can cause efficiency to increase, but the continual movement towards more and more efficiency suggests that the skills of the workforce aren’t keeping pace with those advances. In order to return to a level where there are more opportunities, workers have to offer more skills that can’t be replaced by technology or outsourcing—and by all appearances the economy has a long way to go on that count.