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short essays and reports on the economic issues of the day
2009 ■ Number 44

Vacancies and Unemployment
Riccardo DiCecio, Economist
Charles S. Gascon, Research Support Coordinator


ob openings (vacancies) and the number of unemployed
cies remained low and the number of unemployed increased
workers tend to move in opposite directions over the
for a considerable time.
business cycle. Expansions are usually associated with
Research has shown that the 1990-91 and 2001 recessions
plentiful vacancies and a low number of unemployed
were highly structural: Industries that laid off workers
workers. During recessions the unemployment pool swells
continued to decline after the recession ended.3 A recent
notable shift was from a manufacturing-based economy to
while employers seek to fill fewer job openings.
The inverse relationship between vacancies and unema service-based economy. In fact, during the 1990-91 and
ployment is known as the Beveridge curve (see chart).
2001 recessions, manufacturing jobs accounted for roughly
three-fourths and one-half of all jobs lost. The difficulties
Points in the upper-left corner of the chart generally charassociated with the reallocation of workers from one sector
acterize economic expansions and points in the bottomto another are one possible explanation for jobless recoveries.
right corner represent recessions. Each series of connected
points creates a Beveridge curve for
a particular business cycle. The solid
portions of the lines represent the
Beveridge Curves (1980:Q2–2009:Q2)
recessionary periods and the dashed
portions represent the subsequent
recoveries. The current recession is
Current Recession
more pronounced than previous
2000 Recession
recessions (indicated by uncharac2002-07 Expansion
teristically high unemployment and
1990-91 Recession
1991-2000 Expansion
very few vacancies).
1980-82 Recession
The inward and outward “shifting”
1983-90 Expansion
of the curve is of particular interest.
Among other things, increased labor
market efficiency in matching unem0.0
ployed workers with open positions
shifts the curve toward the origin.
The most recent points lie on a curve
closer to the origin.2
In a recovery, typically vacancies
increase faster than the number of
unemployed workers decreases, generating a counterclockwise pattern.
This pattern is evident during the
1983-90 expansion, where the curve
moves quickly away from the bottomNOTE:
from trend of total unemployment and the
right corner of the chart. However,
Help-Wanted Advertising Index (a proxy for vacancies). The trend is extracted by applying a
the “jobless recoveries” following the
Hodrick-Prescott (105) filter to the data.
SOURCE: Conference Board and Bureau of Labor Statistics.
1990-91 and 2001 recessions are different: During both recoveries, vacan-

Economic SYNOPSES

Federal Reserve Bank of St. Louis

Expansions are usually associated with
plentiful vacancies and a low number of
unemployed workers. During recessions
the unemployment pool swells while
employers seek to fill fewer job openings.



For example, an increased labor force participation rate would shift the curve


See Bleakley, Hoyt and Fuhrer, Jeffrey C. “Shifts in the Beveridge Curve, Job
Matching, and Labor Market Dynamics.” Federal Reserve Bank of Boston New
England Economic Review, September/October 1997, pp. 3-19.


See Groshen, Erica L. and Potter, Simon. “Has Structural Change Contributed
to a Jobless Recovery?” Federal Reserve Bank of New York Current Issues in
Economics and Finance, August 2003, 9(8).

What does this all imply about the possibility of another
jobless recovery? It depends on the path of the adjustment
back toward the upper-right corner in the chart. During
the current recession, employment declines have been more
dispersed. Only one-fourth of job losses have occurred in
manufacturing; the sectors hit by the housing and financial
crisis (construction and financial services sectors) shouldered more of the burden. Still unknown is the extent to
which these sectors will recover and rehire workers or if
these workers will be forced to look elsewhere for new jobs.
The latter scenario would suggest the possibility of another
jobless recovery. ■

Posted on November 12, 2009
Views expressed do not necessarily reflect official positions of the Federal Reserve System.