A few weeks ago I took my son to a birthday party for one of his classmates. There were plenty of games and the usual entertainment including music and the moon bounce. The kids also played the old standard, musical chairs. It was fun watching him play. He did quite well, making sure he kept an eye on all available seats and hustling quickly to an empty one when the music stopped.
Ben S. Bernanke got me thinking about that birthday party today. Mr. Bernanke, the chairman of the Federal Reserve Board of Governors, gave the congressional Joint Economic Committee an update on the nation’s economy. He reminded us that for the past two years, the music had stopped for over 8 million Americans and that almost half of them have been unemployed for six months or more.
Being out of work for over six months takes a toll on one’s skills set. When looking for a job, the search for work amounts to a game of musical chairs but the background music isn’t cheery. When you have been out of work for such a long period of time, the erosion in skills makes it difficult to get to that job you have been eyeing in the paper or heard about at some networking session.
The economists refer to unemployment caused by a mismatch between the skills or location of job seekers and the requirements or location of available jobs as structural unemployment. This type of unemployment is not a new phenomenon. Structural unemployment combined with frictional unemployment, the brief periods of unemployment where people are moving between jobs or entering the labor force, make up a natural rate of unemployment, one that always exists no matter the economic condition of the country.
Economists have traditionally pegged this rate falling somewhere between four and six percent of the total labor force. We have been hovering three to four percentage points over the six percent ceiling for months now and even with March’s positive news of 162,000 new non-farm payroll jobs and the expectation of continued positive job growth, we may not see a sub-six percent unemployment rate for sometime.
As always, there is hope. We have experienced the ravages of structural unemployment before. The question is will the Obama administration have the nerve to make and the American people have the guts to take the tough choices that will decrease the structural pressures. Are we willing to invest in more job training and higher graduation rates? Are willing to see more people stay out of the labor force permanently? How many of us are willing to relocate not only within our borders but overseas to seek new opportunities?
It’s time to think outside the box. Hey. The music’s playing.