What is a Beveridge Curve?

St Louis Fed Economists have this very useful short note on the same. They explain:

Job openings (vacancies) and the number of unemployed workers tend to move in opposite directions over the business cycle. Expansions are usually associated with plentiful vacancies and a low number of unemployed workers. During recessions the unemployment pool swells while employers seek to fill fewer job openings.

The inverse relationship between vacancies and unemployment is known as the Beveridge curve.

This is pretty interesting relationship.

The authors then track this relationship in previous crisis.

  • In the 1980s recession, the vacancies started to increase faster than decline in unemployment. The rise in vacancies then led to a fall in unemployment with a lag
  • However in both 1991 and 2001 recession vacancies hardly picked up  and unemployment persisted. This led to jobless recovery.

What about this one?

What does this all imply about the possibility of another jobless recovery? It depends on the path of the adjustment back toward the upper-right corner in the chart. During the current recession, employment declines have been more dispersed. Only one-fourth of job losses have occurred in manufacturing; the sectors hit by the housing and financial crisis (construction and financial services sectors) shouldered more of the burden. Still unknown is the extent to which these sectors will recover and rehire workers or if these workers will be forced to look elsewhere for new jobs. The latter scenario would suggest the possibility of another jobless recovery.

Hmmm.

Here is another previous post on jobless recovery. This one looked at another useful paper by San Fransisco Fed Economists.

One Response to “What is a Beveridge Curve?”

  1. Romer speaks on Obama’s proposals for emplyment creation « Mostly Economics Says:

    […] this makes the chances of the recovery (see this as well) being jobless […]

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