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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