David Altig, Atlanta Fed economist, made these comments: How much of the current unemployment rate is really due to mismatch, as opposed to conditions that the Fed can readily ameliorate? The answer seems to be a lot. I mentioned that the relationship between unemployment and job openings was stable from December 2000 through June 2008. Were that stable relationship still in place today, and given the current job opening rate of 2.2 percent, we would have an unemployment rate of closer to 6.5 percent, not 9.5 percent. Most of the existing unemployment represents mismatch that is not readily amenable to monetary policy.
These ideas originated using the Beveridge curve, which charts the connection between job openings and unemployment.
My view. This is one reason why the Fed may not be easing further. If true, the main issue facing the country is education.
George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 and 2010 by Timer Digest
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