Are Job Skills Mismatched with Job Openings?

The latest report on job openings indicated that there are 3.27 million positions to be filled. According to the Bureau of Labor Statistics there are 35% more jobs available now than there were in June 2009, the official end of the last recession.

Bloomberg reports today that the number of job openings could be attributed to a mismatch between job skills of unemployed workers and the types of jobs that are available. The chief US economist for Barclays Capital told Bloomberg, “What’s going on here is a mismatch of the skills of the unemployed and at least some of the positions that are becoming available.” This mismatch is often referred to as “structural unemployment.”

But is that really the case? From the abstract to a recent paper entitled “What Explains High Unemployment? The Aggregate Demand  Channel”:

A drop in aggregate demand driven by shocks to household balance sheets is responsible for a large fraction of the decline in U.S. employment from 2007 to 2009. The aggregate demand channel for unemployment predicts that employment losses in the non-tradable sector are higher in high leverage U.S. counties that were most severely impacted by the balance sheet shock, while losses in the tradable sector are distributed uniformly across all counties. We find exactly this pattern from 2007 to 2009. Alternative hypotheses for job losses based on uncertainty shocks or structural unemployment related to construction do not explain our results.

What the paper suggests is that if consumer demand were greater, US employers would be paying more for the skills they need. That is not happening.

The unemployment problem in the US will not be resolved until demand wakes up. Structural unemployment does not explain anything, so attempts to address it won’t fix anything.