Why you can't find a job

By Chris Isidore, senior writer


NEW YORK (CNNMoney.com) -- An increasingly fierce debate is raging over the reason why unemployment is still so stubbornly high.

While most people think businesses simply aren't hiring enough to absorb the millions of unemployed workers, a rising tide of prominent economists dispute that. They claim that there are jobs out there, just not the right candidates to fill them.

"The bigger issue is mismatch. Firms have jobs, but can't find appropriate workers. The workers want to work, but can't find appropriate jobs," said Narayana Kocherlakota, president of the Federal Reserve Bank of Minneapolis, in a recent speech.

Kocherlakota thinks the culprit is so-called structural unemployment -- a serious imbalance in labor markets that has left a large pool of unemployed workers in the wrong place, or with the wrong skills, to take advantage of job opportunities.

With more than 3 million job openings reported by the Labor Department, the unemployment rate should be close to 6.5%, said Kocherlakota, not the 9.6% where it stands now.

He said that one of the reasons for the worsening imbalance is that so many underwater homeowners who can't sell their houses are unable to move in search of job opportunities.

"The kinds of skills [the unemployed have] and the locations where they live are not particularly good matches with available jobs," said Steven Davis, professor at the University of Chicago's Booth School of Business.

And there are other structural issues keeping businesses from hiring, Davis said, like uncertainty about future regulations and taxes and longer-term unemployment benefits, which can make unemployed job seekers less willing to take jobs at low wages.

Jobs won't come back until these issues are addressed, the structural unemployment theorists say.

But the opposing side claims the real problem is that employers just aren't hiring enough. Depressed demand is hurting businesses and causing them to cut back on staff, so there aren't enough jobs to go around.

Structural unemployment is, at best, a minor side issue and, at worst, a distraction that could stop policymakers from taking steps needed to fix the economy, the opposition claims.

"You hear stories about employers here or there not being able to find workers. But when you take a look at the data, there's just no evidence that is the real problem," said Heidi Shierholz, labor economist with the Economic Policy Institute, a liberal think tank.

Only 11% of small businesses are unable to fill open positions, a survey by the National Federation of Independent Business showed. Only 22% said they could find few or no qualified job applicants, about half the level reported before the recession.

Blame it on housing

While the housing crisis is keeping people in place, Shierholz doubts that a lack of mobility is the problem.

There are only four states with unemployment less than 6%, and another 10 with unemployment below 7%. Virtually all of those states have small populations, like Nebraska and North Dakota. Shierholz said they just aren't big enough to swallow up the swells of unemployed job seekers.

"Their labor forces would have to double to absorb the unemployed," she said. "The geographic factors clearly are not the driving factor."

Those arguing that structural unemployment is the problem say the bursting of the housing bubble left a glut of 1.5 million construction workers who can't easily transfer their skills to other industries.

But construction workers make up roughly the same percentage of the unemployed as they did at the peak of the housing boom, which implies that there is no unique imbalance between skills and available jobs, Shierholz said.

While some professions, like health care and education, have experienced a tighter supply of job candidates, unemployment numbers still show an excess of candidates in every industry.

Stagnant wages also imply that supply of workers is outpacing demand, according to Shierholz.

"The thing you'd expect to see with even isolated labor shortages would be low unemployment, high job growth, and wage increases," she said. "We're not seeing that."

Structural unemployment is nothing new, said John Silvia, chief economist with Wells Fargo Securities. There's always some mismatch between workers and job openings, but the huge drop in demand is the driving factor.

"Structural issues are not surprising. It's the dynamics of the U.S. labor market that has been going on since day one," he said.

When economic growth picks up and restores demand, businesses will start hiring again and the jobs will come back, he said.  To top of page

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