Structural Unemployment

In the US, the end of the recession has not brought about a fall in unemployment. In fact July figures showed a rise in unemployment, currently at 9.5%

In a strange twist, there has been a rise in job vacancies not matched by a corresponding fall in unemployment. This suggests there could be a growing mismatch of skills / demand for labour leading to cyclical unemployment being replaced by structural unemployment.

Cyclical unemployment is the unemployment that increases during a recession. Firms produce less so lay off workers. As you might expect unemployment has risen in all the major economies affected by the recession.

Structural unemployment occurs when there are vacancies but people don't have the right skills / motivation to take the job. (this includes occupational and geographical immobilities)

A recession could contribute towards a rise in structural unemployment if skill requirements change during the downturn.

Recessions tend to hit certain sectors of the economy more. For example, In this recession, finance has been hard hit requiring a shift in labour to other sectors. This could require a significant geographical and occupational change.

In Recessions, there is often a fall in the participation rate. e.g. people become demoralised from the labour market and take early retirement or move onto non-unemployment benefits. This is certainly an issue in UK with 5 million people on non-unemployment benefits.

Lagging Factor. It may be too early to make assessments on a change in structural unemployment. Unemployment is often a lagging factor. e.g. firms try to avoid making redundancies during a recession, but, then are reluctant to take workers on in the recovery.

Long Term Trends. There are long term trends in a global economy towards a mixture of high skilled professions (e.g. health and legal) and very low skilled service sector jobs (e.g. cleaning). There has been a steady decline in manufacturing jobs with mid-level skills. These long term trends do put upward pressure on structural unemployment.