Dave Altig of the Atlanta Federal Reserve reflects on the ways in which the unemployment situation in this economic downturn differs from that in economic downturns of the recent past:
Some analysts have suggested the unemployment benefits policies of the last couple of years may be responsible for abnormally high unemployment rates. Estimates generated by several researchers in the Federal Reserve—here and here, for example—suggest that extended unemployment benefits may have increased the unemployment rate by somewhere between 0.4 and 1.7 percentage points. But even if we accept those numbers and adjust the Beveridge curve by assuming that the number of unemployed would be correspondingly lower without the benefits policy, it’s not clear that the puzzle is resolved
If you tend to believe the higher end of the benefits-bias estimates, no puzzle emerges until the second quarter of 2010. And, of course, some estimates apparently deliver an even larger impact of the extended benefits policy. Let’s call the question unsettled at this point.
The most tempting explanation for the seeming shift in the Beveridge curve relationship (to me, anyway) is a problem with the mismatch between skills required in the jobs that are available and skills possessed by the pool of workers available to take those jobs. The problem with this tempting explanation is that it is not so clear that the usual sort of structural shifts we might point to—for example, only nursing jobs being available to laid-off construction workers—are so obviously an explanation (an issue we explored in a previous macroblog post).
There are any number of reasons that the unemployment situation is as bleak as it is in this recession. On the margins it might be the case, as suggested above, that extending unemployment benefits may deter taking a job that’s far below what an unemployed worker may believe he or she should be seeking, either in compensation or the nature of the work or both. There may also be a mismatch between the skill levels of the workers who are unemployed and those required by employers.
Neither of those explanations explains the very small number of jobs that are being created.
One commenter here has suggested that an economic downturn serves as a good pretext for, as he put it, culling the herd, that is, getting rid of less productive or, possibly, more expensive workers. If that’s the case it would suggest that employers have actually been carrying payrolls that are too large for some time. Laying off workers in an economic downturn probably attracts less regulatory scrutiny that it might otherwise and with as many businesses (particularly large businesses) creatures of government to the extent that they are that’s no trivial matter.
I’d like to suggest another way of looking at this recession. Imagine that, rather than being the norms, we treated the two bubbles, the dot-com bubble and the real estate bubble as anomalies. My guess is that there’s an underlying trend in total employment that’s been obscured by those twin anomalies and that absent those two we’ve seen very slow growth and very slow job creation for several decades now.