Cyclical Unemployment Economists Overstating Cyclical Unemployment Rate

Cyclical Unemployment economists overstating cyclical unemployment rate understating natural rate? Are economists overstating the cyclical unemployment rate and understating the natural rate? Cyclical unemployment derives its name from the fact that it reflects the 'cyclical' ebbs and flows of the business cycle (Ask an economist, 2008, Labor Market Info). When the economy is doing poorly, workers are let go and are involuntarily unemployed.

Although the contraction may begin within one economic sector, eventually most spheres are affected as people spend less money, causing production to slow and more workers to be laid off. As the economy improves, production increases, more workers are hired and more workers spend money. However, other types of unemployment exist that are not directly related to the business cycle called 'natural' unemployment. "Frictional unemployment refers to workers who are temporarily without jobs and searching for new ones that are better suited to their skill sets and work preferences..

Structural unemployment refers to unemployment that occurs when a changing economy creates a mismatch between the skills and qualifications of workers looking for jobs and the jobs that are available" (Ask an economist, 2008, Labor Market Info). There are clear signs that there is a discrepancy between workers skill sets and employer's current needs. This suggests that the unemployment rate is due to structural variables. For example: "a survey of 1,123 manufacturing executives released last year found that 67% of companies had a moderate to severe shortage of available, qualified workers.

The report estimated 600,000 jobs nationwide were going unfilled because of a lack of qualified candidates" (Coyne 2012). Low-skilled manufacturing jobs are being outsourced or are now able to be performed with technology. Only low-paying jobs on the retail level that do not pay a living wage are left "or professional jobs that require specific technical skills with too few people to fill them" (Hasham 2012).

A good example is that of the healthcare sector -- while the shortage of nurses has been somewhat delayed by workers putting retirement on hold in the face of a weakening economy, there is still a critical and unfulfilled need for nurses and also nursing educators to train new nurses. This is troubling, given that fewer nurses can lead to poorer care of patients. There is also a shortage of workers in the technology industry.

"We've been dealing with the lack of workers over the years, but not like this...We currently have more than 5,000 openings, tech job openings in San Diego, that we can't fill. There is a severe shortage" noted one California research group (Koba 2012). A lack of adequate technology education in the United States, despite the recession, has left a severe deficit of talent in an industry which the U.S. must continue to dominate, if it wishes to remain an economic power in the future.

However, even while the unemployment rate continues to hover at an unacceptably high level, "The current rate of unemployment for technology workers is around 4%, about half the overall jobless rate, according to the Bureau of Labor Statistics" (Koba 2012). These discrepancies between employer needs and workers' preparation suggests a deep, structural problem within the U.S. economy.

Workers are not acquiring the critical skills that they need to possess to ensure their future employability, and workers let go during the Great Recession are not receiving adequate education in the types of skills in-demand within the economy of the future. This persistent gap of skills and economic needs continues to be reflected in patterns of the majors of students and their employability. "Unemployment is higher among recent graduates with nontechnical fields of study, such as the arts (11.1%) and humanities and liberal arts (9.4%). Graduates who studied health.