Are the unemployed looking for work in all the wrong places?

August 7, 2012

Here's one explanation for our stubbornly high unemployment rate: A construction worker gets laid off and spends months looking for more construction work, rather than readjust his expectations and acquire new skills to find work in, say, the health-care industry, which has experienced steady growth throughout the recession. It's what economists describe as as a "mismatch" between job openings and those seeking unemployment, and some argue that it's responsible for why so many are unemployed. If those seeking work realigned their expectations, got more training, or were simply willing and able to move to a different state for work, then we could bring down unemployment to more reasonable levels. Indeed, a lot of recent hiring has been across sectors.


A jobseeker works on her resume at the education and employment area of N Street Village community center in Washington, D.C. on June 1. (Andrew Harrer - BLOOMBERG)

That's part of the reason that conservatives have long pushed to replace unemployment benefits with job training, as Mitt Romney has proposed in his campaign. President Obama has poured $18 billion into job training efforts himself. But a team of economists recently tried to measure the impact of these factors and concluded that "mismatch can explain at most one-third of the recent rise in the U.S. unemployment rate since 2006," as they explained in a new working paper for the National Bureau of Economic Research.

The paper—co-authored by economists from the Federal Reserve Bank of New York, Columbia, and New York University—examined data on the unemployment and job openings between 2006 and 2011. Certain factors had more of an impact that others. For instance, contrary to the hypothesis that underwater mortgages were keeping unemployed workers from moving elsewhere for jobs, researchers found that geography played "no significant role" in terms of unemployment mismatch.

Their research also counters the notion that lower-educated workers are particularly likely to be mismatched with the job openings out there: For those with less than a high-school education, "mismatch explains a little less than one percentage point (12%) of the 8.5 percentage point increase in unemployment for that group. For high school graduates, mismatch explains 0.89 (13%) out of the 6.9 percentage point increase in unemployment," the paper explains.

So what are the other factors responsible for high unemployment? Weak demand and cautious firms that are reluctant to hire, the paper concludes: "Weak aggregate demand combined with wage rigidity, uncertainty about future productivity and future economic policy, or selective restructuring by firms during recessions do, qualitatively, imply a slow recovery in job creation."

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Dylan Matthews · August 7, 2012