Unemployment, the “New Norm”
Jeremy Greenfield published an article yesterday on Yahoo! Finance that sates Americans looking for work should get used to having a harder time finding it. The unemployment rate is currently 9% and could take until 2016 to reach the natural rate (around 7%). Economists say the figure will be held higher by a skills mismatch in the labor market that has been growing since the 1970s, the recent extension of unemployment benefits and the 2009 minimum wage increase.
“Businesses are looking to hire, but the workers they are looking to hire are not there in the abundance that they want them to be,” Mark Vitner (a senior economist with Wells Fargo) said. Slightly more than half of U.S. businesses are having trouble finding the right candidate for open jobs, according to a survey released today of 1,322 U.S. businesses by global recruitment firm ManpowerGroup. In 2010, only 14% of respondents had similar gripes.
The structural changes that have the strongest effect on the natural unemployment rate are long-term shifts with prolonged consequences for the economy, according to Diane Swonk, chief economist and senior managing director at Mesirow Financial, a Chicago-based financial services firm.
Bart Hobijn, an economist at the San Francisco Federal Reserve, pegs the natural unemployment rate at about 6.5%, and attributes much of the upward shift to the extension of unemployment benefits and surprisingly slow hiring for the high number of job vacancies, which now number over 3.1 million, according to the Bureau of Labor Statistics.
Ironically, extended unemployment benefits and a higher minimum wage — a reaction to the higher unemployment brought on by the recession — contribute to a higher natural unemployment rate by encouraging more people to put off working and discouraging employers from hiring minimum wage workers.
Whether the natural unemployment rate is 5.2% or much higher, the real unemployment rate is still 9%, meaning that there are more than four people on average competing for each job opening.
So hows that “hopeandchange” working for you?