Understanding why the Job Market is Meager in 2012 and 2013
Stocks are back up, so why is the United States still suffering from elevated unemployment?According to the Bureau of Labor Statistics, U.S. unemployment remained relatively unchanged in March 2013 at 7.6 percent, far above the pre-Great Recession full employment unemployment rate (Natural Rate of Unemployment, or NRU) of 4-5 percent, asreported by North Carolina State University. Though the NRU is not expected to remain permanently elevated, theFederal Reserve Bank of Cleveland predictsthat unemployment will remain high for a lengthy period due to discouraged workers returning to the job market. Until this unusually large stockpile of discouraged workers returns to work, the U.S. unemployment rate will remain high.
According to the New York Times, some economists concur and think that the elevated unemployment is due to temporary consumer and business hesitancy to resume spending. Others insist that the unemployment rate is temporarily higher due to structural changes in the economy as America moves from a 20th century industrial/service economy to a 21st century digital economy. More workers are temporarily between jobs as they retrain for new methods and technologies.
There is a dark side, however, that may be less often discussed. The increased use of modern technology may have permanently elevated the NRU by allowing employers to get the same production with fewer workers. Many workers were laid off between 2008 and 2010, during the Great Recession, and now that investment is returning employers are realizing that they don't need to rehire nearly as many workers as they laid off. The "skeleton crew" workforces that survived the recession adequately handled the job...so why return to pre-2008 staffing levels?
Businesses have an incentive to keep payrolls trim and unemployment rates high. If more workers are anxious and fear losing their jobs, they will work harder and keep their heads down. As long as the vast majority of employers avoid returning to pre-2008 payrolls, it remains a hirer's market with many more applicants than job openings. By keeping application numbers far higher than job opening numbers, employers can pick and choose among stacks of resumes. Why would businesses want to lose this privileged system?
Another possibility for explaining an elevated NRU is modern technology that allows countless individual workers to apply for countless jobs, creating hiring gridlock. If each unemployed person can apply for a dozen jobs per day via the Internet, all available job openings are swamped with resumes, taking many man-hours to sort through and organize. As a result, the hiring process slows down. Employers slam into low gear as they sift through the paperwork and look for the best possible applicant. Sometimes the person to whom they offer the job is also receiving other job offers, further slowing the process as the rejected employers must go to their respective second choices.
Additionally, the drastic increase in the number of entry-level white collar applicants with 4-year college degrees has swamped such job openings with resumes, once again slowing the hiring process. Decades ago there was a much smaller pool of college-educated talent from which to choose, but now the pool is tremendous. Employers have little choice but to slow down and sift carefully if they care to net the best talent.
