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For years economists have stressed the flexibility of the Americanlabor market. Employers in the U.S., less impeded by strong unionsand fussy labor market regulation than in other advanced economies,were quicker to fire workers during downturns and faster to hireonce demand picked up. Workers were flexible too, partly becausethey had to be. With less of a welfare-state cushion than mostEuropeans, they were more willing to pick up and move to a new job.They did their part. Unemployment is hard, especially in a country that reveres effortand expects its citizens to pull their weight. The stories in thisissue of Bloomberg Businessweek about individual Americans finding jobs after long spells of searching make the pain of joblessness all too clear. The other themes inthose tales, though, are persistence and resourcefulness: Thecompanion to flexibility is resilience. Historically, drawing on those strengths, America s smootherturnover of jobs has resulted in faster growth and a lower overallrate of unemployment. Particularly important was the lower rate oflong-term unemployment, the kind that most corrodes skills and sapsthe will to work. This labor-market edge over the competition hasbeen a critical ingredient in the country s economic success. Isthis great American advantage now fading? What prompts the questionis the slow, un-American recovery from the Great Recession. An oldrule of thumb the steeper the recession, the stronger therecovery has been set aside since 2008. Three years since thetrough, the jobless rate still hovers around 8 percent. The reason isn t hard to see. The causes of this recession wereunusual. Downturns brought on by debt overload and financialbreakdown are thankfully rare, but when these so-calledbalance-sheet recessions happen they take longer to shake off. Thegood news is the U.S. is recovering, albeit tepidly by its ownstandards, and joblessness is inching down. The worry, meantime, isthat the toll of long-term joblessness may be causing permanentdamage, pushing the U.S. toward European labor-market sclerosis. The implication is that full employment is no longer what itwas. It might mean an unemployment rate of 7 percent, say,rather than 5 percent as before the recession. If so and theFederal Reserve tried to push through the new floor for joblessnesswith extra monetary stimulus, the result would be rising inflation,not more people at work. A rise in so-called structuralunemployment, if it s happening, would be a serious setback. One troublesome piece of evidence is a relationship called theBeveridge curve (named after an influential British economist ofthe 1930s and 40s). It compares unemployment and vacancies. Asthe economy contracts, joblessness rises and vacancies shrink.During the recovery, the process reverses. In the current upturn,the curve isn t retracing its steps. Unemployment is falling moreslowly than you d expect, given the rise in vacancies. This bears watching. It could be a sign of mismatch between theskills employers want and the skills applicants are offering, whichwould point to higher structural unemployment. In an April 11speech, though, Fed Vice Chairman Janet Yellen advises caution.Some of the shift is likely because of temporary extensions ofunemployment benefits, which might encourage job seekers to be morechoosey. As the extensions end, she says, things should get back tonormal. In previous recoveries, vacancies often picked up fasterthan hires. Detours in the Beveridge curve aren t uncommon. Yellen points to other signs unemployment remains more cyclicalthan structural, hence susceptible to sustained monetary stimulus.For instance, many analysts have cited house lock as a brake onemployment: Unable to sell their houses because of underwatermortgages, unemployed workers find it harder than usual to move tofind work. Although plausible, the theory doesn t hold up, saysYellen. Internal migration has been trending lower in the U.S. for yearsbut shows no sudden drop of late, she says. During the recession,the fall in mobility was no bigger for homeowners than for rentersand no worse where house prices fell farthest. As for the mostimportant factor of all the determination of jobless Americans toget back to work our stories suggest it s undimmed. In all, it s right to regard American unemployment as stillpredominantly cyclical. Jobs will keep coming as demand revives,and it s too soon to let concerns about inflation drive monetarypolicy. For now, you might say, the U.S. labor market is stillexceptional. But this can t last indefinitely. If the recoveryslows, the damage caused by long-term joblessness will worsen. Atsome point, labor-market sclerosis will set in. Remember that fiscal policy is set not just to slow the recovery atthe end of this year but to crush it. The expiring provisions ofcurrent law promise to push the economy over the fiscal cliff ofabruptly higher taxes and severe cuts in public spending. Aself-inflicted second recession is the formula that would finallycripple the labor market and kill one of America s greatesteconomic advantages. It s an experiment best avoided. To read Noah Feldman on censorship at Sina Weibo and William D.Cohan on more Facebook IPO fallout: Bloomberg.com/view . I am an expert from custom-embroidery-digitizing.com, while we provides the quality product, such as Convert Raster Image To Vector , China Embroidery Digitizing Services, Embroidery Design Digitizing,and more.
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