The main reason unemployment is high is simple: The economy is weak. Businesses don't have the demand necessary to expand, and when they do, they're plagued with caution and keep expenses as low as possible.
But some have argued another point: that there's a structural element to unemployment, meaning those looking for jobs aren't qualified for the positions being offered, or don't live in regions where companies are hiring, or extended unemployment benefits are encouraging people to stay unemployed. Home construction in Florida is abysmal, for example, but Microsoft (Nasdaq: MSFT ) still has 5,000 unfilled job openings -- up a quarter from last year.
I think the effects of structural unemployment are lower than some make them out to be, but there's an element of truth to the idea. Here's one indication: Adjusted for the size of the labor force, there are more nationwide job openings today than there were in 2004:
Source: Bureau of Labor Statistics.
The unemployment rate came down as job openings went up, so part of this isn't surprising. But as former President Bill Clinton explained a year and a half ago:
For the first time in my lifetime, literally in my lifetime, when coming out of a recession, posted job openings -- that means they'll hire you tomorrow morning if you can do the job -- ... are going up at twice the rate of job hires. ...
There are two reasons for this. One is more than 10% of us are living in houses where the mortgage is worth more than the home, so we can't move. And that's cutting down on labor mobility, which has always been a big strength of America. But that's way the smaller problem.
By far the bigger problem is the jobs that are open don't have applicants that are qualified to do them. There's this huge skills mismatch. [There was a] huge college dropout in the last decade because costs went up 75% after inflation, and because the economy went down people had to drop out to work, and they cut back on a lot of intensive skills training.
We ought to have a list of every job that's been vacant for more than three weeks, by state, and just give 'em the money to train people immediately. And they ought to be able to do it while they're on unemployment. Give it to the employers if the community colleges and the vocational programs won't do it. ... You know how many jobs that is? Five million. The unemployment rate could go down under 7% if no bank made a single loan [and] if no corporation invested any of their surplus cash -- if we just made sure that tomorrow we had qualified applicants to go fill every posted job opening.
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