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Friday, March 30, 2012

Skills Mismatch, Construction Workers, and the Labor Market

Via the NY Fed's Liberty Street Economics blog:

Skills Mismatch, Construction Workers, and the Labor Market, by Richard Crump and Ayşegül Şahin: Recessions and recoveries typically have been times of substantial reallocation in the economy and the labor market, and the current cycle does not appear to be an exception. The speed and smoothness of reallocation depend in part on the structure of the labor market, particularly the degree of mismatch between the characteristics of available workers and newly available jobs. Such mismatches could occur because of differences in skills between workers and jobs (skills mismatch) or because of differences in the location of the available jobs and available workers (geographic mismatch). In this post, we focus on skills mismatch to assess the extent to which the slow pace of the labor market recovery from the Great Recession can be attributed to such problems. If skills mismatch is much more severe than usual, we would expect the unemployment rate to remain higher for longer and the workers subject to such mismatch to have worse labor market outcomes.

We concentrate particularly on construction workers, who many have thought are prone to a high degree of skills mismatch because of the housing boom and bust. Contrary to this view, we find that (1) general measures of mismatch, after rising sharply in the recession, are now near their pre-recession level as they continue to display a pronounced cyclical pattern; and (2) construction workers are not experiencing relatively worse labor market outcomes. ...[continue reading]...

These two points support the argument I've been making that many of the structural factors that people are seeing are likely to be temporary and hence should not constrain monetary policy (i.e. to the extent that natural rates have changed, much of the change is temporary).

    Posted by on Friday, March 30, 2012 at 12:30 AM in Economics, Unemployment | Permalink  Comments (16)



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