Question

In: Economics

2."Even though the Great Recession officially ended, the unemployment rate is still considered high." Discuss.

2."Even though the Great Recession officially ended, the unemployment rate is still considered high." Discuss.

Solutions

Expert Solution

Overall demand (in the U.S. economy as a whole) is not sufficient to buy all the goods and services U.S. workers could produce, if all the resources of the economy were fully employed. If the company managers do not think they can sell the goods that could be produced when running at full capacity, they will lay off workers and facilities and equipment that are idle. That's what's been happening in the last couple of years in the US and other countries. Millions of workers are unemployed, because of insufficient "aggregate demand"

For all time, the relation between job openings and unemployment, represented by the Beveridge curve, is not fixed in one position. It can be moving about. Increases in structural unemployment in the Beveridge Curve are associated with a shift "out" (more job vacancies, plus unemployment). While there are plenty of openings, some kind of mismatch explains why workers who want jobs are not being hired.

Structural-unemployment story supporters point to the uptick in job openings late last year, with no reduction in unemployment. It looks like employers start looking for workers again (because job openings are rising), but employers do not hire (because unemployment is not coming down). So some economists have concluded that there must be some sort of misalignment between the skills or location of workers and the needs of employers.


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