The Real Unemployment Problem

The real reason unemployment is so high is more because new jobs aren’t being created, not that so many are being laid off.  Normally, people are being fired/laid off/quit all the time and new jobs are being filled at the same time.  The ratio of quits (what economists call fired/laid off/ quit) and hires is critical to achieving full employment.  Right now, the problem is too few hires.  John Robertson explains at Macroblog:

At the end of August there were estimated to be fewer than 2.4 million job openings, equal to only 1.8 percent of the total filled and unfilled positions—a new record low. This is an especially significant issue given the large number of people who are looking for work. The ratio of the number of unemployed to the number of job openings was greater than 6 in August. In contrast, that ratio was under 1.5 in 2007 and previously peaked at 2.8 in mid-2003, suggesting that finding a job right now is extremely difficult (see the chart).