The Beveridge Curve is heading the wrong way (COMMENTARY) ...
 

A couple of weeks ago one of our editorial advisory members mentioned that some economists think the Beveridge Curve has shifted outward and to the right since 2007, which is not good (no political implications).

Developed in the late 1950s by two British economists (neither of whom were named Beveridge, but we digress), the Beveridge Curve, according to Famous Figures and Diagrams in Economics, is an attempt to measure "excess demand in the goods market for the guidance of Keynesian fiscal policies. ... Since excess demand is unobservable ..."   Huh? The actual idealized curve is a "rectangular hyperbola" -- double "say what"? And, you are just going to have to trust us when we say, the mathematical formula for drawing a Beveridge Curve is a triple 'they-have-got-to-be kidding", squared.

Its basic concept of comparing job vacancies to unemployment seemed intriguing to us, albeit with a fairly obvious relationship, which would be an inverse one. Unemployment should go down as vacancies rises and vice-a-versa, which is a phenomenon that every staffing professional has likely experienced firsthand. But the question remains if the relationship between vacancies and unemployment in the current economic cycle is different than in the past. So we went about plotting those two measurements and the resulting chart is displayed above (if the chart is unclear, click on it to open in a new browser window). Let's just call what we came up with as "Steinberg's Non-Wonky Beveridge Curve."

We think our chart shows in dramatic fashion how severe -- and different -- this past recession has been and how the recovery still has some serious distance to travel before we are in a "normal economy," which is the area between the two recessions represented in the chart. And there are a bunch of other interesting clues how this past recession and subsequent recovery is fundamentally different than "normal."

Although the vacancy rate has finally recovered to the level for the period after a recession, clearly the unemployment rate has not. As we've discussed in this space many times before, but the persistent high unemployment rate -- despite an acceptable number of vacancies in a post-recessionary period -- could likely be due to a mismatch between those job openings and workers' job skills. The lack of enough qualified people to fill a rising number of job openings is being widely reported throughout the media and indeed is a phenomenon that staffing companies are seeing today. But that also means it's an opportunity for staffing companies who have figured out how to fill those openings.

We found it particularly interesting how the two series definitively moved in opposite directions before the recession officially started. Let us know what the chart says to you.

2020 is only eight years away ... this free report will help you plan to get there

Our special supplemental standalone report on the future nature of jobs to the year 2020, which includes a focus on what the future holds for staffing and employment services, is still available. And because we know our audience tend to the analytical, the eight-page report is packed with charts and tables of data. The report also includes lists of the fastest growing industries/sectors as well as types of jobs in order for staffing executives to help in their strategic planning for the immediate future. If you would like a copy free of charge, just shoot us an email and we'll send the link to you.