Here’s why it’s so hard to land a job

June 25, 2014

Six years into the recovery, the American jobs situation is still in a rut. The relationship between how many people are looking for a job (the unemployment rate) and how many jobs are available (the jobs opening rate) has historically been predictable. Plotting it out in chart form gives you what is known as the Beveridge Curve, named after the British economist William Beveridge. The idea is that as the number of workers who are looking for a job rises — which to employers means the pool of talent for them to hire from gets bigger — the available jobs get filled and the opening rate goes down.

This is what it has looked like since 2001:

The Beveridge Curve

The first thing to notice is that something happened in 2008: the Beveridge Curve shifted to the right and stayed that way. That means employers aren’t hiring as many unemployed people as they should be, according to a pre-2008 view of the world. It is also one of the reasons the economy feels like it is still bad, even though the recession officially ended five years ago.

The question is why is the curve so far off from what would be expected in a normal recovery? And how can things be brought back on track?

The answer often cited is that the economy has a skills mismatch. Fewer people are finding jobs than they have in the past because they aren’t qualified for the jobs that are available. This is less about the Great Recession and more about changing technology and needs. Imagine a 45-year-old man who has worked in an auto factory his whole life up until it was shut down in 2009. He can’t be quickly or easily retrained to be a nurse or a computer programmer, which are the only jobs he sees available that pay as much as his old manufacturing job, so he remains unemployed.

But there’s a problem with this theory: if the problem really is a mismatch of jobseekers to jobs, why did it happen so suddenly? The decline in manufacturing and the need for computer programmers existed long before 2009. Plus, as Dean Baker notes, if a skills mismatch really were the big problem, wages should be rising for those who do have the skills (and the jobs). But they’re not.

Economist Brad DeLong floated another reason for the shift a few days ago. The shift in the curve might be because of a collapse of social networks. He doesn’t mean Facebook friends, but the loose network acquaintances people have in their daily lives (maybe even people you’ve met but aren’t friends with on Facebook).

Think of your aunt’s best friend who you see at a July 4 party once a year, who paid you $50 to organize all her files one summer when you were 15. She might say, “Hey, my office is looking for an administrative assistant, and I heard from your aunt that you need a job. Send me your resume.” DeLong is worried that young people might not have enough of those connections, and, more worryingly, that older workers that got laid off during the Recession haven’t kept up with their old connections. Submitting a resume through a computerized system is just not as effective as knowing someone in real life..

Then the next question becomes: what caused the atrophy of our social networks?


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and maybe it is because there is more incentive for those not working to find a job that is not what they want.

Posted by costag1 | Report as abusive

The ‘skills mis-match’ is largely fabricated. People can, and always have, learned on the job. Requiring a bachelor’s degree in economics for a city accounting job is just silly. You don’t need to know theories. And even if you do, give them a handbook and tell them: Here’s our 50 pages of dumb theories. Read them, know them. See you Monday.

The whole idea of skills mis-match is a made-up problem because supervisors need to feel special and smart. “I need bright people.” No, you need sober people who can type and show up to work.

Posted by AlkalineState | Report as abusive

Employer requirements have increased and become nearly impossible to meet in many cases. I’ve seen a job posting with “Lone Wolf Software experience required”. And by experience they mean multiple years. How could one gain experience with this obscure program?

Social networks definitely still exist, but rules and regulations don’t allow friends to give each other jobs.

Oh, and let’s discuss those computerized job application systems themselves – even as a tech worker who finds database work routine, I think these systems are poorly setup, extremely time consuming, and egregious in what they require of applicants. Standard large companies now require so much personal information, time and effort and then rarely contact more than a few percent of applicants.

Posted by ladders11 | Report as abusive

The collapse of social networks idea sounds quaint and all but I simply can’t buy it. Let’s go back to your question “why did it happen so suddenly?”. There are good reasons but lack of social networks doesn’t answer that question. If my aunt’s best friend doesn’t know somebody looking for a job somebody else at the company does and the job gets filled just as quickly. There would be no competitive advantage to folks who haven’t been unemployed for a long time vs. those that have. In fact it stands to reason that the longer time unemployed person has more time on their hands for social networking and therefore would be in a better position to get the referral from their aunt’s best friend because they have more time to go to that July 4 party in the first place.

During the 1990’s we (the American business and technology community) got increasingly good at several things that we then began truly capitalizing on in the early 2000’s. The combined impact of these things answer your question. Three key examples are:

1. Web based delivery of a wide range of services. I haven’t been to the DMV in years, I can register my car online now. That means less DMV employees. Multiply this across the whole spectrum of services and shopping that now require less labor than before and that all came about rather suddenly in the scheme of things.

2. Outsourcing (not off-shoring, I’ll get to that). Very few small businesses handle payroll in-house anymore. It’s outsourced like more and more functions that used to be an internal person or department. This increases efficiency and decreases costs. We really started down this road in the 80’s with the whole LBO Raider phenomenon but it became mainstream in the 90’s and matured in the early 2000’s. Outsourcing can take years to accomplish for an individual company but once standard service offerings become the norm, they can be adopted by many many companies over a relatively short time-frame.

3. Off-shoring has impacted nearly every aspect of the job market and with large corporate players focusing on the outsourcing and off-shoring of not only manufacturing but all lower skill business process type jobs as their core business, off-shoring really started moving many thousands of jobs out of the country every year in the early 2000’s. A combination of new technology and management capabilities have facilitated this shift and it continues to creep up the skill curve moving more and more complex and highly skilled jobs to lower cost labor markets every year.

Importantly the jobs impacted most by all three of these maturing business capabilities tended to be those requiring a high school diploma or less and 2 – 6 weeks of on the job training to gain reasonable proficiency. So during a relatively short period of time, we removed large numbers of jobs requiring the same level of skills from the job market completely. Those businesses who weren’t able to successfully leverage web based technology, outsourcing, and off-shoring found themselves unable to compete in the “new normal” over-supplied economy and either downsized or shutdown completely putting even more people out of work. We flooded the unemployment line with the people who used to do these lesser skilled jobs and were then somehow surprised when they couldn’t find work in the vastly downsized job market.

I submit that the combination of these three key factors is an abridged but fair answer to your question “why did it happen so suddenly?”. All the social networking in the world isn’t going to recreate that large pool of jobs that are completely gone from our first world economy for at least the foreseeable future.

Most importantly, I believe that this is something we need to strive to communicate to that 45 year old laid off auto worker you mentioned. Our advice to him should not be “get out there and network more” it should be, “I know it sucks but you really should bust your butt to get that computer programming or nursing degree as fast as you possibly can so that you can get one of those jobs that do still exist.”

As an editorial addition, how can we responsibly shift funds from Unemployment Insurance to help pay for higher education in a state funded institution? If that auto worker is willing to attend a state funded university and meet reasonable progress requirements towards a degree, why not shift some money to invest in that education rather than just continue to pay benefits for longer and longer periods of time. Complicate, yes. Political, yes. Subject to abuse, yes. But do’able? YES

Posted by SullyK | Report as abusive

Social networks have broken down due to the ease of travel as well. People used to have family and friends in a neighborhood where they would get together for dinner or coffee. With neighborhoods not being so stable, that ‘link’ is gone. The other things that was prevalent was when people went to church together and with the breakdown of the church family, that link is gone as well. We are so ‘global’ now that the only way to keep in touch is electronically. JMO

Posted by cathyval | Report as abusive

Two things… Businesses need to be reassured that the rules are going to be set, and not changed… Foreign trade agreements, pollution issues, corporate taxes, banking regulation… All the rules have to be setup, and then that’s it. That hasn’t happen. They keep changing everything, then threatening to change more. Nobody is going to spend capitol for expansion, when they could have to start over from scratch a couple years later. The C02 emissions nonsense is a perfect example.

Two… The American public needs to stop buying cheap Chinese junk, and start buying USA made stuff. Yes, it will be more money… Deal with it. You’re investing in your country. Corporations provide cheap foreign junk, because the public buys it. Don’t buy it, they won’t offer it. Problem solved.

Posted by dd606 | Report as abusive

The problem is exacerbated by the influx of illegal aliens, some 112MM and counting. The problem is caused by the Administration and Congress that don’t have the common sense to correct the problem. Our laws need to be enforced, the American people need to get off their butts and go after Obama and Congress, and all public assistance needs to be cut off for illegal aliens.

Posted by p19 | Report as abusive

What caused the atrophy of our social networks?

Ironically social media has! Social media is the most anti social event in modern history, ask a kid these days to call and order a pizza, or speak to the local shop owner for a job, they shy away because they have to actually speak to someone, “why can’t we order it online?” or “I’ll drop off my resume!” Moreover, social networks such as Linkedin elliminates the need to actually contact potential employees to establish communication skills rather prospective employers fish through countless profiles for the cream, polished profiles! Gone are the days where skills actually mattered, and a smile or handshake made since!

Posted by the-editor | Report as abusive

I don’t understand why that theory answers the question of why the sudden and persistent shift at 2008. Are social networks more likely to collapse suddenly than skill sets?

Posted by KenSG | Report as abusive

Social Networks.

Posted by janosphere88 | Report as abusive

The one ***BLOODY OBVIOUS*** theory is that the employers wish to devalue your job! If they used to pay you at a rate of “x” and they post an “opening” at some value lower than “x”; the employer figures you are overpaid and replaces you…

The whole idea of the Internet has made employers rejoice because they can fill openings faster due to the unemployment rate being so high. (due to a number of contributing factors)

Let us not forget that we are now competing with wages overseas; if you want to survive in this economy – one must compete with someone that can live on a fraction of what you do – and don’t expect any help from the government.

Posted by Anonymouse_3 | Report as abusive

Employers are being more selective than pre-recession because they have a justified perspective that higher quality people are available. The bar has been raised.

Posted by ssor | Report as abusive

The old saying of “it’s not what you know, it’s who you know” is true. Networking in the working world is essential. That means one needs to know how to communicate

Posted by alwayslearning | Report as abusive

I think you miss the point which is that since 2008 a 45 year old computer programmer has just as hard time finding work as a 45 year old from a factory recently closed. I think that there are two other factors at work.

#1 is the McJob phenomenon. Permanent full-benefits positions have become like suburban houses, overspecified, over valued and a must have for the remaining middle class. It’s horribly costly to the bottom line, so a second tier of benefit-less and contract jobs have been created, creating a whole gray area between unemployed and employed. But those McJobs are a big drain on the bottom line and corps can’t create many of them. Boomers in particular see those as “real jobs” and so the number of available positions relative to seekers is actually far more out of sync than the numbers would indicate.

#2 is that employers have always hired youth and with the mismatch in numbers they can do that exclusively now. You unconsciously know that, as your example demonstrates.

The other factor is an extension of the first point. Gen X and Y are more and more in charge as middle tier managers, who do most the hiring. They don’t give a damn about the bottom line but only that they have like minded people around them. Boomers make them nervous…mainly because they have qualms about lying at the drop of a hat.

It’s always been the case that people use three hiring criteria. 1) How much do you look like the last person doing the job? 2) Will you make me look bad to my boss? 3) How much fun do you look like you’d be to work with? Magnify that by the points I made initially and you have a situation where Boomers in particular are not going to get hired. Unless they want to work 1/2 time on contract while the thirty somethings work from home, get paid time off for hobby breeding…basically play with the toys they want to when they want to.

American business has dire need of two reforms. McJobs and blank check information technology. No one holds their IT department to account in the same way other core activities are routinely. IT really does mean never having to say you’re sorry. Or specify requirements. Or bring ROI. It’s like a whole category of McJobs on steroids. If this isn’t the case, why are so many work visas written for contract positions, particularly in IT? There are plenty of Americans to fill those jobs. But they want a McJob, not a contract position. This has become the fudge factor, but it’s not sustainable.

Posted by SigmaTheta | Report as abusive

If social networks collapsed, that’s just the collapse of one mechanism for finding a job. That job still exists, and would go to someone else through a different mechanism-internet perhaps. If you don’t think there was an actual job opening there, the administrative assistant in this example, and that companies hired people out of charity rather than for an actual need, then that is a different rationale for the shift in the beveridge curve. I do think there is some validness to this employment as charity argument. FDR’s New deal certainly decreased the unemployment rate by doing something that many people did not perceive as a need at the time.

Posted by KevyD | Report as abusive

I agree with skills mismatch . That was no small change all three major automakers and all the businesses attached to them and the loss of all that buying power . I don’t think there’s anything to compare to in the past .

Posted by makemyday1987 | Report as abusive

That’s an interesting idea. I read a study a few years ago in the WSJ that said the average American used to have 5 really good friends in the sixties and seventies and that had dropped to 2 good friends in the last 5 years. It also claimed that 20 percent of Americans claim they have zero good friends. I thought that was very sad. Well, I hope it’s not true.

Posted by TheBondster | Report as abusive

Age discrimination still exists even in boom times. It’s just given other names such as “over-qualified” or “not skilled in current technology” or…

Posted by act1 | Report as abusive