The debate over US unemployment | FT Alphaville

The debate over US unemployment

Brad DeLong has waded into the debate over whether US unemployment is cyclical or structural. For structural unemployment, he says, you tend to see a mismatch: one sector can be “depressed with idle excess labour” while another is “booming with rising wages and prices.”

So where does America stand today? Over the past three years to July, he says, total employment has fallen by 7.88m to 129.95m. Meanwhile, the adult population has grown by 6m.

And what has happened by sector?

  • Employment in logging and mining has risen by 11 thousand
  • Employment in construction has fallen by 2.1 million
  • Employment in manufacturing has shrunk by 2.4 million
  • Employment in wholesale trade has fallen by 437 thousand
  • Employment in retail trade has fallen by 912 thousand
  • Employment in transportation and warehousing is down by 333 thousand
  • Employment in publishing, except internet is down by 147 thousand
  • Employment in motion picture and sound recording is down by 34 thousan
  • Employment in broadcasting, except internet is down by 41 thousand
  • Employment in telecommunications is down by 54 thousand
  • Employment in financial activities is down by 921 thousand
  • Employment in professional and business services is down by 1.3 million
  • Employment in educational services is up by 197 thousand
  • Employment in health care is up by 789 thousand
  • Employment in leisure and hospitality is down by 467 thousand
  • Employment in other serivces is down by 32 thousand
  • Employment by the federal government is down by 330 thousand
  • Employment by state and local governments is down by 127 thousand.


I see employment growth in (a) internet, (b) health care, and (c) logging and mining. I see employment declines everywhere else.

That does not look like a story of “mismatch” unemployment–in which demand shifts in a direction that the existing labor force cannot cope with, and the result is structural unemployment in declining sectors and occupations and boom times and rising wages and prices in those sectors and occupations to which demand has shifted. That does not look like that at all.

DeLong is responding to James Ledbetter’s analysis of the various arguments presented by the Strucs and Cycs — with DeLong, of course, siding with the latter.

For a slightly different way of viewing the data, below is a chart posted by Mike Mandel in May, showing the percentage of job losses by sector since the start of the recession:

We’re fans of DeLong, but aren’t his numbers and the above chart also consistent with what you would see if unemployment had both structural and cyclical components?

It has been clear for some time that employment in certain sectors has been hit much harder than in others. So isn’t one alternative explanation simply that structural factors are largely responsible for the relative severity of the decline in some sectors, while cyclical factors are responsible for there being insufficient offsetting demand in the others?

As noted when Minneapolis Fed president Narayana Kocherlakota tried to pin “most” of the unemployment problem on the mismatch, and noted again when it turned out there was nothing weird in the Beveridge Curve, it seems premature to draw conclusions either way.

With respect to the government’s role, both Mark Thoma and Felix Salmon have contributed some ideas for how fiscal policy can help even if unemployment is structural (though we agree with Felix’s general pessimism that much will actually be done).

And as for what further monetary loosening might accomplish — well, if it’s true that the recent housing numbers have strengthened Bernanke’s hand, we might soon find out.

(H/T @hnmoore)

Related links:
Identifying cyclical vs. structural unemployment: a guide for Slate writers
– Brad DeLong
Strucs vs Cycs
– Slate
Unemployment: strucs vs cycs – Felix Salmon
Beveridge curve redux – FT Alphaville
Can government help with structural unemployment? – CBS Moneywatch