Expansions are usually associated with plentiful vacancies and a low number of unemployed workers. During recessions the unemployment pool swells while employers seek to fill fewer job openings.Unemployment ; Recessions ; Labor market

Charles S. Gascon

Riccardo DiCecio

English

Research Papers in Economics

Economic SYNOPSES
short essays and reports on the economic issues of the day
2009 ￿ Number 44
J
ob openings (vacancies) and the number of unemployed
workers tend to move in opposite directions over the
business cycle. Expansions are usually associated with
plentiful vacancies and a low number of unemployed
workers. During recessions the unemployment pool swells
while employers seek to fill fewer job openings.
The inverse relationship between vacancies and unem-
ployment is known as the Beveridge curve (see chart).
Points in the upper-left corner of the chart generally char-
acterize economic expansions and points in the bottom-
right corner represent recessions. Each series of connected
points creates a Beveridge curve for
a particular business cycle. The solid
portions of the lines represent the
recessionary periods and the dashed
portions represent the subsequent
recoveries. The current recession is
more pronounced than previous
recessions (indicated by uncharac-
teristically high unemployment and
very few vacancies).
The inward and outward “shifting”
of the curve is of particular interest.
Among other things,1 increased labor
market efficiency in matching unem-
ployed workers with open positions
shifts the curve toward the origin.
The most recent points lie on a curve
closer to the origin.2
In a recovery, typically vacancies
increase faster than the number of
unemployed workers decreases, gen-
erating a counterclockwise pattern.
This pattern is evident during the
1983-90 expansion, where the curve
moves quickly away from the bottom-
right corner of the chart. However,
the “jobless recoveries” following the
1990-91 and 2001 recessions are dif-
ferent: During both recoveries, vacan-
cies remained low and the number of unemployed increased
for a considerable time.
Research has shown that the 1990-91 and 2001 recessions
were highly structural: Industries that laid off workers
continued to decline after the recession ended.3 A recent
notable shift was from a manufacturing-based economy to
a service-based economy. In fact, during the 1990-91 and
2001 recessions, manufacturing jobs accounted for roughly
three-fourths and one-half of all jobs lost. The difficulties
associated with the reallocation of workers from one sector
to another are one possible explanation for jobless recoveries.
Vacancies and Unemployment
Riccardo DiCecio, Economist
Charles S. Gascon, Research Support Coordinator
–0.6
–0.4
–0.2
0.0
0.2
0.4
0.6
–0.3 –0.2 –0.1 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7
Unemployment
Vacancies
Current Recession
2000 Recession
2002-07 Expansion
1990-91 Recession
1991-2000 Expansion
1980-82 Recession
1983-90 Expansion
Beveridge Curves (1980:Q2–2009:Q2)
NOTE: The chart plots the percentage deviation from trend of total unemployment and the
Help-Wanted Advertising Index (a proxy for vacancies). The trend is extracted by applying a
Hodrick-Prescott (105) !lter to the data.
SOURCE: Conference Board and Bureau of Labor Statistics.What does this all imply about the possibility of another
jobless recovery? It depends on the path of the adjustment
back toward the upper-right corner in the chart. During
the current recession, employment declines have been more
dispersed. Only one-fourth of job losses have occurred in
manufacturing; the sectors hit by the housing and financial
crisis (construction and financial services sectors) shoul-
dered more of the burden. Still unknown is the extent to
which these sectors will recover and rehire workers or if
these workers will be forced to look elsewhere for new jobs.
The latter scenario would suggest the possibility of another
jobless recovery. ￿
1 For example, an increased labor force participation rate would shift the curve
outward.
2 See Bleakley, Hoyt and Fuhrer, Jeffrey C. “Shifts in the Beveridge Curve, Job
Matching, and Labor Market Dynamics.” Federal Reserve Bank of Boston New
England Economic Review, September/October 1997, pp. 3-19.
3 See Groshen, Erica L. and Potter, Simon. “Has Structural Change Contributed
to a Jobless Recovery?” Federal Reserve Bank of New York Current Issues in
Economics and Finance, August 2003, 9(8).
Economic SYNOPSES Federal Reserve Bank of St. Louis 2
research.stlouisfed.org
Posted on November 12, 2009
Views expressed do not necessarily reflect official positions of the Federal Reserve System.
Expansions are usually associated with
plentiful vacancies and a low number of
unemployed workers. During recessions
the  unemployment  pool  swells  while
employers seek to fill fewer job openings.

Vacancies and unemployment

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Vacancies and unemployment

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