Labor & Employment Law

8.9 Percent Jobless Rate Not ?Normal? nor Structural

By Mike Hall

Put this under the heading of ?voodoo economics.?  The argument goes that the nation?s 8.9 percent unemployment rate?after nearly two years between 9 and 10 percent?is the new ?normal? unemployment rate. Proponents of this absurd claim say it?s workers? fault because they don?t have the skills to fill the jobs or don?t live near the jobs that are available.

A new study by the Center for Economic and Policy Research (CEPR) takes this theory?also known as ?structural unemployment??and blows it out of the water.

Says CEPR senior Economist John Schmitt:

We are not in a national employment crisis because the available workforce is not well-matched with the available jobs. We are in a crisis because the economy is not producing enough jobs.

Most mainstream economists say the nation is in the grip of what is known as ?cyclical unemployment? that can be addressed be government actions such as fiscal stimulus or low interest rates that lead to job creation. But those policies would have little or negative effects if  the jobless crisis actually was structural in nature.

The paper, Deconstructing Structural Unemployment, co-authored by Schmitt and CEPR Economist Kris Warner, says:

We find little support that structural unemployment is on the rise? Policy makers would do well to consider that the cyclical nature of current unemployment rates underscores the role that expansionary monetary policy can play in safely and substantially lowering the unemployment rate with little or no risk of inflation.

Click here for the full report.

Full post as published by AFL-CIO NOW BLOG on March 15, 2011 (boomark / email).