7.9 million jobs lost, many forever

In the July 2, 2010 CNNMoney article "7.9 million jobs lost, many forever," Chris Isidore reports that many of the jobs lost recently will not return.

Even in a Recovery, Some Jobs Won't Return

In the January 12, 2010 Wall Street Journal article "Even in a Recovery, Some Jobs Won't Return," Justin Lahart explains some of the structural changes in the U.S. labor market.

Even when the U.S. labor market finally starts adding more workers than it loses, many of the unemployed will find that the types of jobs they once had simply don't exist anymore.

The downturn that started in December 2007 delivered a body blow to U.S. workers. In two years, the economy shed 7.2 million jobs, pushing the jobless rate from 5% to 10%, according to the Labor Department. The severity of the recession is reshaping the labor market. Some lost jobs will come back. But some are gone forever, going the way of typewriter repairmen and streetcar operators.

Many of the jobs created by the booms in the housing and credit markets, for example, have likely been permanently erased by the subsequent bust.

"The tremendous amount of economic activity associated with housing, I can't see that coming back," says Harvard University economist Lawrence Katz. "That was a very unhealthy part of the economy."

Unhealthy but a boon for men without a college education. One in three jobs, or six million total, have been lost in the manufacturing sector since 1997, the last year the sector posted job gains. The upsurge in construction jobs accompanying the housing boom provided these workers in manufacturing with an opportunity to earn decent wages.

Now that door, too, has shut. With 1.6 million jobs lost over the last two years, the construction sector has accounted for more than a fifth of the jobs lost since the recession began.

For more highly educated workers, finance may no longer offer as many high-paying jobs as it has in the past. Thomas Philippon, an economist at New York University's Stern School of Business, estimates that the financial sector's share of the economy was nearly 20% larger than it should have been. Since the start of the recession, the financial sector has lost 548,000 jobs, or 6.6% of its work force. Mr. Philippon's estimate suggests there will be further pressure on financial jobs.

In other areas of the labor market, the recession accelerated job losses that were probably coming anyway. In November, there were 36% fewer people working in record shops than two years earlier, according to the Labor Department. There were 23% fewer people working at directory and mailing list publishers, and 46% fewer at photofinishing establishments. Those are jobs that, with the advent of mp3 recordings, Google and digital photography, were likely disappearing anyway.

But as the recession hurt already ailing businesses, workers were forced into a sudden adjustment rather than the gradual one they would have otherwise faced. The recession also provided companies with an opportunity to cut jobs no longer as critical as they once were. That may be particularly true of the secretaries and mailroom clerks that advances in information technology have made less necessary. The ranks of people doing office and administrative work have fallen 10.1% since the recession began.

"Those are the production jobs of the information age, and they're being to a substantial extent automated," says Massachusetts Institute of Technology economist David Autor.

The permanent loss of many jobs may keep the labor market from fully recovering for a long time to come.

Prior to the 1990s, jobs rebounded quickly once recessions ended. Payrolls fell by nearly three million in the deep downturn that extended from July 1981 to November 1982. But by the start of 1983, the economy was creating jobs again, and by the end of 1983, the U.S. job count had exceeded its old peak.

That was because more of the job losses were essentially temporary, with manufacturers and the like letting workers go with the implicit expectation that they would be hiring them back once the worst was over.

But since the early 1990s, jobs have been slower to recover from recession. After the 2001 downturn ended, job losses continued for nearly two years. It wasn't until 2005 that the job count returned to its prerecession high.

Productivity-enhancing technology and competition from low-wage countries like China made more job losses permanent. And it took time for new jobs to be created and for workers to acquire the skills needed to do them. In the wake of a far deeper recession, creating new jobs and retraining workers to do them could take even longer.

It is anyone's guess what those jobs will be. The Labor Department has done little more than extrapolate from recent trends. It expects growth in areas like health care, which has been one of the few bright spots. Given the exigencies of an aging population, that seems a fair bet.

One could also make the case that the U.S. is shifting from a consumer nation to a nation of producers, and that will lead to a resurgence in technology and high-tech manufacturing jobs.

But Harvard's Mr. Katz warns that past experience suggests such conjecture is likely fruitless. "One thing we've learned is that when we attempt to forecast jobs 10 or 15 years out, we don't even get the categories right," he says.

Reshaping the Job Market

Hotel Director Forced to Give Up Own Home

Tim Winters, Aspen, Colo. Age 39

After getting laid off in March from his job as operations director at a small hotel, Tim Winters could no longer afford his $1,200 a month apartment. He has been living at family members' homes, an ironic twist for someone who often used to stay for free at hotels when he traveled. "It takes a lot of understanding and time to get used to living with other people again," says Mr. Winters, who started his career in hospitality in 1996. Mr. Winters says he has applied for approximately 170 hotel-management positions and has had 14 interviews, but no job offers yet.

Economy Chips Away at Cabinet Maker's Business

Daryl Jones, Tulsa, Okla. Age 45

Daryl Jones misses the smiles that would appear on clients' faces after receiving the one-of-a-kind cabinets, bedroom sets and other wood furniture he built by hand while running his home-based business. But sales plummeted in recent years, prompting the third-generation craftsman to take a job building cabinets for corporate jets to make ends meet. Still, Mr. Jones is optimistic that one day he will return to his custom woodworking full time. "Once the economy bounces back and people feel comfortable again spending money, then things will start picking back up."

Auto Industry Executive Goes Back to School

Jeff Walker Brighton, Mich. Age 53

Jeff Walker, a former auto industry executive, doesn't mind being among the oldest students at Eastern Michigan University. "I'm happier than just being unemployed and looking for a job," he says. In April, Mr. Walker lost his job as a vice president of operations at a small auto equipment supplier in Brighton, Mich., where he had worked for 22 years. Mr. Walker is studying technology management in pursuit of the college degree he started but never finished after high school. Now, he says, he just wants to "get out of manufacturing."

Veteran Trucker Worries About Paying the Bills

Duane Dittbrenner, Cleburne, Texas Age 50

Duane Dittbrenner was laid off last month from his job at Arrow Trucking Co. He has been struggling to find another trucking job in the Dallas-Fort Worth area. "Where I live, most of it is hazmat and tankers," says Mr. Dittbrenner, who has hauled big rigs for the past 20 years throughout the U.S. Mr. Dittbrenner says he is worried he won't be able to pay next month's bills if a new job doesn't come along. "It's just getting out there and pounding the pavement," he says. "I'll have one soon. All you can do is be optimistic."

Growing Demand, but Low Pay, for Home Health

Debra Allicock, Brooklyn, N.Y. Age 42

Debra Allicock migrated to New York from Guyana in 2000 and took a job as a home-health aide, helping the elderly with errands, meals and light housekeeping. She says the relationships she gains are what motivates her to work 12-hour days despite low pay and no medical insurance. "You get to get very close and attached with them," she says of her clients. Ms. Allicock says her services are in high demand. "Why go to a nursing home when you can stay in your home surrounded by everything you love?" she says. "Maybe one day someone is going to return that favor for me."

Real Estate Executive Tries a New Path

Richard Hawthorne, Laguna Beach, Calif. Age 58

Richard Hawthorne has been out of work since June 2007, when he was laid off from a small commercial real estate investment firm where he was director of development. "In past downturns I've done well, but this downturn has me stumped," he says. Mr. Hawthorne enjoyed his more than 30 years in commercial real estate. "There was something new and totally unpredictable each and every day to solve," he says. But now, tired of being told he is overqualified for jobs in his field, he is launching a business advising financial institutions on how to eliminate investment property debt.

-- Interviews by Sarah E. Needleman

Structural Unemployment: Even as layoffs persist, some good jobs go begging

Structural unemployment occurs when the skills of the workers seeking employment do not match the requirements of available jobs. In the article "The Top 5 Hardest Jobs to Fill in America," freelance writer Mary Fineday reports that although the overall U.S. unemployment rate is a relatively hight 10%, there are some occupations that have more job openings than qualified applicants.

Looking for a career with a high level of demand? A recent survey found that some jobs feature more openings than trained workers. Training for one of these top jobs can help ensure your degree training will be highly valued when it comes time to look for work.

Career Training for Careers In Demand

The survey, conducted by employment agency Manpower, Inc., found a range of careers in high demand across the country. "From our research it is clear that across the country employers are experiencing a mismatch between the talent their businesses need and the skills and abilities potential employees possess," said Jonas Prising, president of Manpower North America.

Matching your own talent up with potential employers may require a degree or career training program. Check out a few of the hardest jobs to fill in America, and learn more about the career training recommended for each.

Career #1: Engineers

Working as an engineer requires intelligence, organization, and a high level of specialized skills. Engineers typically work in one area of engineering; for example, mechanical or petroleum engineering. A bachelor's degree in engineering is required for most entry-level careers in the field.

For those with the right degree training and skill, engineering salaries offer big rewards. Civil engineers earned mean annual wages of $78,560 in 2008, according to the Bureau of Labor Statistics (BLS), and the job is expected to see a high level of future growth.

Career #2: Technicians

Looking for an engineering career without a four-year bachelor's degree? Consider training to become an engineering technician. These trained workers use an associate's degree in the engineering specialty they choose to move swiftly into the workforce. Engineers and the public alike depend on technicians for their ability and knowledge.


According to the BLS, electrical and electronic engineering technicians earned mean annual wages of $53,990 in 2008. If you love the work but want a higher salary and more responsibility, you can transition your associate's degree into bachelor's degree training.

Career #3: Accountants

Make your skills with financials and business work for you with a career as an accountant. These number lovers are a big asset to individuals and businesses alike, who rely on them to do everything from interpreting tax laws to organizing a company's finances. Forensic accountants follow paper trails and help out with court cases.

The educational path to become an accountant varies. Accounting clerks may require only an associate's degree, while fully-licensed accountants may need a bachelor's degree in accounting plus CPA certification. Regardless, accountants earned mean annual wages of $65,840 in 2008, the BLS reports.

Career #4: Mechanics

Working on cars has always required a mix of technical knowledge and a passion for all things automotive. Today, automotive service technicians and mechanics benefit from an associate's degree level of training. With the high-tech diagnostic devices used in garages today, a little computer-based knowledge goes a long way.

The BLS notes that automotive service technicians and mechanics earned mean annual wages of $37,540 in 2008. An associate's degree is recommended for employment, and mechanics with certification may see the best opportunities.

Career #5: IT Staff

This broad category includes many of the country's fastest-growing occupations, including network systems and data communications analysts, computer software engineers, computer systems analysts, and database administrators. In any company with a network of computers and technology, a highly trained IT staff is appreciated.

Most IT staff jobs require a bachelor's degree in computer science, engineering, management information systems, or similar, though some entry level careers -- such as careers for Web masters -- may only require an associate's degree. Specific earnings for IT staff depend heavily on the career you choose. The BLS reports that database administrators saw mean annual earnings of $72,900 in 2008, for example.

Valuable Education for Popular Careers

While no degree program can guarantee a particular career or salary, the training you receive is often preferred or required by hiring managers in the careers above. After a few years of training, you could be filling the need for trained workers in the field of your choice.

Mary Fineday is a freelance writer from Austin, Texas.

Unfilled Jobs Illustrate Structural Unemployment

In the November 2009 article "Good Jobs Going Unfilled: 6 Careers in High Demand," Patricia Cecil-Reed illustrates structural unemployment because the skills of current unemployed workers do not match the skills required in these growing sectors of the U.S. economy.

With the U.S. unemployment rate now above 10 percent, millions of Americans are searching for new careers. A strange paradox currently exists, however. There are also many empty jobs that remain unfilled. So what's the problem? According to economists and hiring managers, the main problem is finding candidates with the right career training for jobs in emerging fields like energy, health care, and engineering.

Some of these careers require only one to two years of training, while others call for a four-year degree, but one fact remains clear: These new industries are here to stay. Investing in continuing education or career training might be a small price to pay to stay in the game for years to come. Below are some of the hottest careers in need of qualified professionals.

Environmental Science Technician

As scientific procedures have become more complex, the role of science technicians has steadily increased. Technicians not only solve problems in research and development, but also are specially trained in operating and maintaining laboratory equipment. Environmental science technicians perform their work with the goal of determining, alleviating, or controlling environmentally harmful substances.

Job growth for environmental science technicians is expected to be much faster than average from 2006 to 2016. The most common job requirement is a two-year associate's degree in science-related technology.

Average Annual Salary: $43,180.

Electrical Engineer

Electrical equipment of all kinds is developed, designed, and tested by electrical engineers. From lighting to electric motors to the wiring of buildings, electrical engineers shine new light on the way we live and work. Most electrical engineers specialize in an area like power systems engineering or electrical equipment manufacturing.

A bachelor's degree in engineering, with a specialty in electrical engineering, is usually a requirement for entry-level jobs.

Average Annual Salary: $85,350.

Internal Auditor

Following a rash of corporate scandals coupled with the current financial crisis, companies are cracking down on waste, fraud, and mismanagement. Internal auditors evaluate an organization's financial and information systems while keeping an eye on efficiency and productivity. They also evaluate organizational compliance with corporate and government regulations.

A bachelor's degree in accounting or a related field is a good idea for auditors. Some colleges offer programs specifically geared towards internal auditing. Certification as a certified internal auditor (CIA) also boosts credibility and hiring potential.

Average Annual Salary: $65,840.

Management Accountant

For many accountants, there has been a professional shift away from merely preparing tax documents. Management accountants work for businesses, recording, and analyzing their financial information. They also prepare budgets, financial reports, and cost management strategies. Management accountants often work as part of an executive team and communicate with company heads, stockholders, creditors, and regulatory agencies on a regular basis.

Employment of accountants is expected to grow by 18 percent over the next seven years. A bachelor's degree in accounting or finance is usually required, and those who have certification as a certified public accountant (CPA) or other professional certifications should have the best opportunities.

Average Annual Salary: $65,840.

Diagnostic Medical Sonographer

As sonography grows in popularity, and in some cases becomes preferable to radiologic procedures, there is a growing demand for sonographers. Diagnostic sonography helps in diagnosing ailments of all kinds, using high frequency sound waves to assess a particular part of the body. Sonographers are specially trained to use this equipment and evaluate the results. They also interact with patients, keep detailed records, and maintain sonography equipment.

Most employers prefer to hire registered sonographers who have trained for the position by earning an associate's or bachelor's degree in X-ray technology or a closely-related field. In some cases, those already working in the health care field can earn a one-year certificate that may suffice for entry-level sonography positions.

Average Annual Salary: $62,660.

Cardiovascular Technologist

These technologists assist physicians in diagnosing heart and blood vessel ailments. Their day-to-day duties often include scheduling appointments, explaining procedures to patients, and maintaining equipment. Cardiovascular technologists generally specialize in one of three areas: invasive cardiology, echocardiography, or vascular technology.

This career is expected to see much faster than average job growth in coming years, with 26 percent growth expected. Most cardiovascular technologists have an associate's degree in x-ray or cardiovascular technology. Certification is also available, but is not always required.

Average Annual Salary: $48,640.

Like it or not, it seems unlikely that outmoded industries will be making a comeback anytime soon. Rather than hitting your head against a career wall, consider training for a new career in an emerging field. The time spent may be rewarded in a fulfilling new career and an end to your lay-off worries.

Structural Unemployment: Even as layoffs persist, some good jobs go begging

In the November 3, 2009 CNNMoney article "Despite millions of job seekers, many positions sit open," Jessica Dickler provides evidence of structural unemployment in the U.S. economy. (Structural unemployment occurs when the skills of unemployed workers do not match the skills required in available jobs.)

Despite millions of unemployed job seekers desperate for work, many open positions are languishing unfilled. The reason? Not enough candidates.

With job openings largely concentrated in specialized industries like health care, green technology and energy, some employers say the problem is finding qualified workers, which are in short supply. Meanwhile, they are inundated with eager candidates from other industries who lack the skills and experience that the job requires.

According to a recent survey by Human Capital Institute and TheLadders, more than half of employers said "quality of candidates" or "availability of candidates" are their greatest challenges -- despite the recession.

Mary Willoughby, the director of human resources at the Center for Disability Rights in Rochester, New York, has been trying to hire registered nurses, home health aides and service coordinators for several of the agencies that she oversees.

Many of the positions, which require specific skills and offer salaries in the range of $30,000 to $45,000, have been vacant for six months or longer.

The job postings, which appear on CareerBuilder, Craigslist and some regional sites, garner a lot of attention, she says. "We get tons of résumés from people. We are just not getting highly qualified candidates."

The problem, according to Willoughby, is that they are bombarded by résumés from job seekers without the two years or more of health care experience necessary. "We're seeing a lot of people trying to break into the health care arena," she said.

As a result, human resources spends too much time sifting through résumés for people who aren't remotely qualified, and can't find many that are. "We've gotten close to 300 résumés for a service coordinator position. Out of that we brought in four people," she said.

Those that didn't make the cut included someone with previous experience as an office clerk and a job applicant with a bachelor's in mathematics, currently employed at a café.

Willoughby recently instituted a hiring incentive program to encourage existing employees to refer viable candidates. Those responsible for bringing in new hires are eligible to receive $2,500 to $5,000, depending on the position. She has also added in a signing bonus for the new employees.

Things are even worse on the higher end of the pay scale. At wireless leasing firm, Unison Site, a position for director of lead generation, which pays $90,000-$140,000, has been open for three months, with no candidates in sight.

"With the job market the way it is, we should be able to recruit really good people and it hasn't worked quite as well as we wanted," said Joe Songer, co-founder and chief financial officer. "My problem is when I put an ad out I just get bombarded with people that aren't qualified."

Typically, the jobs that are the hardest to fill are those that require unique or extensive work experience, according to management professor Peter Cappelli of the University of Pennsylvania's Wharton School of Business.

For job seekers, applying to those types of positions may be worth the off chance that one responds with a request for an interview. "They think, I've got nothing to lose," Cappelli said.

Recruiters recommend that job seekers create a targeted list of companies with a clear match to their background and tailor their experience to the job they are applying for, rather than blanketing all available job openings with the same résumé.

"Eighty percent of jobs are being obtained on personal referrals so candidates that are spending the bulk of their time sending their resume out blindly are not being the most fruitful," said Carolyn Thompson, president of CMCS, a boutique staffing firm near Washington, D.C.

Thompson advises job seekers to network within those target companies, whether in person or through social networking sites.

Without a contact at the company, résumés should highlight and emphasize any relevant experience specific to the job opening, added Jennifer Becker, market director for Ajilon Professional Staffing. "You really want your résumé to very quickly and easily reflect your relevant skills and the value you can bring to the position."

"If the client has to look for it, you are probably going to get passed over."

Structural Unemployment: Even as layoffs persist, some good jobs go begging

Structural unemployment occurs when the skills of unemployed workers do not match the skills required in available jobs. In the October 4, 2009 article "Even as layoffs persist, some good jobs go begging," Associated Press business writer Christopher Leonard provides examples of structural unemployment in the U.S. economy:

In a brutal job market, here's a task that might sound easy: Fill jobs in nursing, engineering and energy research that pay $55,000 to $60,000, plus benefits.

Yet even with 15 million people hunting for work, even with the unemployment rate nearing 10 percent, some employers can't find enough qualified people for good-paying career jobs.

Ask Steve Jones, a hospital recruiter in Indianapolis who's struggling to find qualified nurses, pharmacists and MRI technicians. Or Ed Baker, who's looking to hire at a U.S. Energy Department research lab in Richland, Wash., for $60,000 each.

Economists say the main problem is a mismatch between available work and people qualified to do it. Millions of jobs with attractive pay and benefits that once drew legions of workers to the auto industry, construction, Wall Street and other sectors are gone, probably for good. And those who lost those jobs generally lack the right experience for new positions popping up in health care, energy and engineering.

Many of these specialized jobs were hard to fill even before the recession. But during downturns, recruiters tend to become even choosier, less willing to take financial risks on untested workers.

The mismatch between job opening and job seeker is likely to persist even as the economy strengthens and begins to add jobs. It also will make it harder for the unemployment rate, now at 9.8 percent, to drop down to a healthier level.

"Workers are going to have to find not just a new company, but a new industry," said Sophia Koropeckyj, managing director of Moody's Economy.com. "A fifty-year-old guy who has been screwing bolts into the side of a car panel is not going to be able to become a health care administrator overnight."

It's become especially hard to find accountants, health care workers, software sales representatives, actuaries, data analysts, physical therapists and electrical engineers, labor analysts say. And employers that demand highly specialized training — like biotech firms that need plant scientists or energy companies that need geotechnical engineers to build offshore platforms — struggle even more to fill jobs.

The trend has been intensified by the speed of the job market decline, Koropeckyj said. The nation has lost a net 7.6 million jobs since the recession began in December 2007. Yet it can take a year or more for a laid-off worker to gain the training and education to switch industries. That means health care jobs are going unfilled even as laid-off workers in the auto, construction or financial services industries seek work.

"So we have this army of the unemployed" without the necessary skills, Koropeckyj said.

Sitting in his office overlooking the Clarian Health complex, Jones leafed through some of the applications he's received. One came from a hotel worker who listed his experience as, "Cleaning rooms; make beds, clean tubes, vacuum." Another was from a fitness instructor whose past duties included signing up gym members.

Many of the jobless seem to be applying for any opening they see, Jones said.

"You just don't have the supply to fill those particular positions," he said of the more than 200 "critical" jobs he needs to fill at Clarian, including nurses, pharmacists, MRI technicians and ultrasound technologists.

Contributing to the problem is that in a tough economy, employers take longer to assess applicants and make a hiring decision. By contrast, "in a healthier economy, you don't wait around for the perfect person," said Lawrence Katz, a professor of labor economics at Harvard.

To be sure, employers in most sectors of the economy are having no trouble filling jobs — especially those, like receptionists, hotel managers or retail clerks, that don't require specialized skills.

But as more jobs vanish for good, the gap between the unemployed and the requirements of today's job openings is widening. Throughout the economy, an average of six people now compete for each job opening — the highest ratio on government records dating to 2000.

Sifting through applications for jobs at the U.S. Energy Department's Pacific Northwest National Laboratory in Washington state, Baker said he sees "people that have worked in other areas, and now they're trying to apply that skill set to the energy arena."

"Unfortunately, that's not the skill set we need."

The jobs opened up after the lab received federal stimulus money to research energy-efficient buildings. Baker needs employees with backgrounds in city management and a grasp of the building codes needed to design energy-efficient buildings. Yet even a salary of $140,000 for senior researchers isn't drawing enough qualified applicants.

Baker said he's getting resumes from well-educated people, including some from information technology workers who want to enter the green-energy field. But he said it could take a year to get an unqualified employee up to speed on all the building codes they need to know.

"We're running out of people to train" new employees, he said. "We simply cannot attract enough (qualified) people."

The lab has hired a recruiter for the first time to fill dozens of positions. Rob Dromgoole, the recruiter, is going so far as to make cold calls to college professors. He's also visiting academic conferences to pitch jobs.

The trend has left jobseekers like Joe Sladek anxious and frustrated. Sladek's 23 years in the auto industry haven't helped his efforts to land a job in alternative energy since he was laid off a year ago.

As a quality control engineer for auto supplier Dura Automotive Systems Inc. in Mancelona, Mich., he made about $75,000. Sladek would review technical reports to make sure the factory's auto parts matched the specifications of clients like General Motors and Toyota.

He hoped to parlay that experience into a similar job at a factory making windmill blades or solar panels. Several factories were hiring, and Sladek landed a few interviews. But he never heard back.

At PricewaterhouseCoopers in Chicago, there's a shortage of qualified applicants for management jobs in tax services, auditing and consulting. Rod Adams, the company's recruiting leader, said huge pay packages on Wall Street siphoned off lots of business school graduates earlier this decade.

"That made our pipeline more scarce," he said.

Some of the openings at PricewaterhouseCoopers pay around $100,000 and don't even require graduate degrees — just specialized accounting certifications or other credentials.

Formerly successful bankers or hedge fund managers don't necessarily qualify.

"We've gotten a lot more resumes, but they haven't been the right people," Adams said.

Important Definitions Related to the Macroeconomic Policy Goal of Low Unemployment

Unemployment refers to adults who do not have a job, but are looking for one.

· employed – people who spent most of the previous week working at a paid job.

· unemployed – people who do not have a paid job, but are looking for one. This category includes workers who are temporarily laid off and people who have found a job and are waiting for it to begin.

· not in the labor force – people who do not have a paid job and are not looking for one, such as retirees, homemakers, and full-time students.

· Current Population Survey is a telephone survey of approximately 60,000 randomly selected adults that is used to calculate several commonly reported measures of labor market conditions.

· The labor force is the total number of workers in an economy, including both the employed and the unemployed.

· The labor force participation rate is the percentage of the adult population in the labor force.

· The unemployment rate is the percentage of the labor force that is unemployed.

The natural rate of unemployment is the normal rate of unemployment around which the unemployment rate fluctuates. The natural rate of unemployment is currently estimated to be 5.5%.

· Underemployment refers to people with jobs who are not working as much as they want or need to work.

· Discouraged workers are individuals who would like to work but have given up looking for a job.

· In markets for labor, the price of labor is often referred to as the wage rate.

· The equilibrium wage rate is the price of labor at which the quantity of labor supplied equals the quantity of labor demanded.

· The market wage rate is the price of labor paid in a labor market. It may or may not be the same as the equilibrium wage rate.

· A minimum wage law is a price floor that specifies the lowest price that employers can legally pay for labor.

· A price floor is a legal minimum price at which a product can be sold.

· Labor unions are worker associations that bargain with employers over wages and working conditions.

· Collective bargaining is the process by which unions and business firms agree on the terms of employment.

· A strike is the organized withdrawal of labor from a business firm by a union.

· Efficiency wages are above-equilibrium wages paid by firms in order to increase worker productivity.

· Frictional unemployment occurs because it takes time for workers to search for the jobs that best suit their skills and preferences.

· Job search is the process by which workers find appropriate jobs given their skills and preferences.

· Unemployment insurance is a government program that temporarily provides unemployed workers with a fraction of their previous earnings.

· Structural unemployment occurs when workers have job skills that do not match the skills required by available jobs.

· Cyclical (Keynesian) unemployment is the deviation of unemployment from its natural rate.

· The natural rate of unemployment (5.5%) is the normal rate of unemployment around which the unemployment rate fluctuates.

· The business cycle is the natural fluctuations in the economy.

· Cyclical unemployment is also called Keynesian unemployment.

· John Maynard Keynes (1883-1946) was a British economist who popularized the idea that the government should play an active role in managing the economy.

· Classical economic theory suggests there is no role for government because the economy corrects itself.

· Keynes agreed that the economy might correct itself in the long run. However, he thought a natural correction might take an extremely long time. The Great Depression motivated Keynes to say “in the long run we are all dead.” Keynes’ most famous book, published in 1936, is entitled The General Theory of Employment, Interest, and Money.

· Aggregate demand (AD) refers to total spending in the economy on newly produced goods and services.

· Expansionary monetary policy refers to an increase in the money supply. This reduces interest rates and encourages more consumption (C) and investment (I) spending.

· Expansionary fiscal policy can be achieved by either (1) reducing taxes to encourage more spending by households and businesses (C + I); or (2) increasing government purchases (G).

Structural Unemployment

Structural unemployment occurs when workers have job skills that do not match the skills required by available jobs. If a U.S. steel mill closes, for example, the steelworkers are likely to become structurally unemployed. There may not be enough jobs in the U.S. steel industry for all of the Americans who are trained to work in the production of steel. The remedy for structural unemployment is anything to improve the ability of these workers to acquire additional education and skills training, such as improved financial aid for attending college or vocational school.

Types of Unemployment and their Remedies

Types of Unemployment and their Remedies

There are three major types of unemployment: frictional, structural, and cyclical (Keynesian).