EPI Paper: Reasons for Skepticism About Structural Unemployment

It’s been a bad week for the argument that our current employment crisis is mostly “structural.” Here’s EPI with Debunking the theory of structural unemployment and their new paper Reasons for Skepticism About Structural Unemployment (pdf) by Lawrence Mishel, Heidi Shierholz and Kathryn Anne Edwards.

Here’s a data point against the geographic mobility story and something to keep in mind when you think about the states with “low unemployment”:

Finally, though there is a sharp disparity in unemployment rates among states, the problem is not a lack of geographic mobility. Though 11 states had an unemployment rate of less than 7% in June, those states account for only 7% of the adult population of the U.S. If the 14.6 million unemployed workers nationwide relocated to those 11 states, they would double the labor force in them.

Even better, when you look at states with low unemployment you see that their current unemployment is still higher than it was during the 2000s. So even if South Dakota has a seasonally-adjusted unemployment rate of 4.5% in August 2010, it had one of 3.2% in August 2006. So unemployment is up, even among these low unemployment, low population (South Dakota has ~800,000 people) states.

More:

Moreover, the 32 million jobs openings in the first twelve months of this recovery are 10 million short of the openings in the prior recovery, which was also a “jobless” recovery. Additionally, the shortfall in job openings is occurring in every sector other than mining and is not just confined to specific industries, like construction.

This recovery is even weaker than the previous one. Unemployment is still way above even the highest estimates of structural unemployment resulting from the foreclosure crisis and underwater mortgages, leaving plenty of room for demand-side policies. Indicators of Economics 101 tell us that we aren’t hitting supply-side problems.

Congress and Treasury are running out of options if they haven’t already. The Fed is asleep at the job. But that doesn’t mean it’s time to start ignoring the data staring us in the face.

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2 Responses to EPI Paper: Reasons for Skepticism About Structural Unemployment

  1. Whiplash! Weren’t you just the other day making the case that structural issues, specifically geographic mobility (via problems in the housing market), are important?

    Is the debate really about the degree to which structural versus deficient aggregate demand factors are driving unemployment? Shouldn’t it be about which policies would do the most to help the labor market?

    Suppose 1/10th of 1% of unemployment is due to structural issues but fixing those problems would cost $0.01 but fixing ag demand would cost $10^100. Does it matter in this extreme case if “most” of unemployment is not structural? No, you choose the policies that give the most bang for the buck.

  2. hazeleyes says:

    We’re getting no bangs for lots of bucks, so now what?

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