Economists at times fancy themselves scientists – and they like to borrow from scientific lingo to lend their theories some extra gravitas.
The U.S. unemployment crisis is a case in point. There is a long-running debate among economists as to whether the bulk of joblessness is cyclical, resulting from a lack of demand in a depressed phase of the business cycle, or structural, the product of more fundamental issues such as skills mismatches. The latter problem is more intractable, economists say, and less amenable to treatment via an easy monetary policy.
Nearly three years into the economic recovery, the jobless rate remains at a historically elevated 8.2 percent. Moreover, the economy has only made up about 3.6 million of the nearly 9 million lost during the recession. Against this backdrop, there is widespread concern that the U.S. economy might soon reach a point of what economists call (and here’s where the science comes in) “hysteresis.” In physics, the concept is defined as follows:
The retardation of an effect when the forces acting upon a body are changed (as if from viscosity or internal friction); especially : a lagging in the values of resulting magnetization in a magnetic material (as iron) due to a changing magnetizing force.
In economics, the term refers to the possibility that prolonged periods of cyclical joblessness, if left unchecked, could become structural as workers skills are eroded and their attachment to the labor force fades.