The San Francisco Fed has just released a paper that suggests the current unemployment rate has nothing to do with structural problems in the economy. They base this conclusion on the fact that the country’s youth is experiencing a similar jobs downturn in now that it did 2001.
Authors Bart Hobijn, Colin Gardiner, and Theodore Wiles conclude:
The current labour market outcomes of recent college graduates closely mirror those observed during the 2001 recession and the subsequent jobless recovery. This is important because recent college graduates are not subject to the kinds of structural factors that have been posited as the main sources of weakness in the overall labour market. Unemployment rates during the 2001 recession are widely recognised as cyclical in nature. Similarities in the experiences of recent college graduates in the labour market during the two recessions and recoveries are evidence that high unemployment rates in the current downturn and recovery are also mainly cyclical.
There are several reasons why this makes no sense. First, here’s what the SF Fed means by structural:
- “mismatches between workers and employers”
- “employers are looking for skills that are different from those that available workers offer”
- “jobs are available in geographic regions with few qualified job seeker”
We have ample evidence that the mismatch is there. Construction employees unemployed by the post-real estate bubble recession have not found new jobs.
There is ample evidence that jobs may be available, but few people may be qualified.
Many regions of the country remain more depressed than others. Unemployment rates are higher in certain states associated with the housing bubble, like California and Nevada.
So most of the unemployment problem is the result of cyclical concerns because youth unemployment is trending with overall unemployment. All other factors need not apply.
Photo: San Francisco Fed