DeLong Smackdown Watch: Structural Unemployment Edition
Robert Waldmann is not alarmed:
This is really getting extreme. All this discussion of the shift of the Beveridge curve is discussion of 1 (one) data point 2010Q2. Earlier points are above the non-Beveridge line, but, you know it is (and always has been) a curve. It is also not exactly the cutting edge approach to presenting data on vacancies and unemployment. That would be the matching function. Discussions of the vacancy rate and unemployment rate in 2010Q2 do not discuss gross flow -- hiring and job separations. You and others assume that gross hiring is low for some reason, since, otherwise the unemployment rate would fall. Some data on hiring and firing might be relevant no ? It also should be available to the social security administration (I will try to find numbers -- I guess my complaint is about statistical agencies not economists).
A stable matching function implies counterclockwise cycles above the Beveridge curve. Such cycles are visible in all data sets which include major recessions (I complain about too much attention to one number but also wonder why the graph I always see starts in 2000). I am absolutely totally not at all convinced yet that there is a hiring anomaly. I'd like to see a second data point before I read the hundredth post on v and u in 2010Q2. I think I will have to avoid economics blogs to achieve this goal.
Now on the famous Ben Venue example (I haven't read a hundred posts about the datum 47 qualified applicants yet either but I'm getting there) I think the main point of the complaint was not the only 47 qualified applicants (which might just mean they were offering too low a wage) but the over 3,600 job applications. Notice there is a news story with 2 numbers (maybe 3 counting the offered wage) and everyone ignores one of them. My sense is that issue is that there are a huge number of desperate unemployed people who apply for jobs knowing they have only a tiny chance of being hired. Normally people try to apply only for jobs for which they are qualified, but if there are no such jobs vacant, they have no choice but to bet on long shots.
Now this hord of desperate unemployed people might make it more costly and time consuming to hire and might reduce hiring as a function of vacancies and qualified unemployed people. If so, the solution is to extend unemployment benefits to prevent people from making trouble by desperately clogging all paths to employment. However, I'll wait for a second data point before speculating further.