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During Recovery, Fewer Jobs for the Less-educated
Daily Policy Digest

Economic Issues / Unemployment

Thursday, March 07, 2002
As business activity picks up, jobseekers who lack education and skills should be prepared for a frustrating time. Job creation has a tendency to lag economic recovery, economists have found. And when employers do resume hiring, accomplished workers are usually the first to find jobs. Only later do employers begin considering applicants who have less to offer.

  • The recession of the early 1990s ended in March 1991, with an unemployment rate of 6.8 percent.
  • But unemployment continued to rise for 15 months and did not settle below 6.8 percent again until the end of 1993.
  • Moreover, the rate rose from 12.3 to 13.5 percent for high school dropouts in the year after the recession ended -- while for college graduates it stayed at 2.9 percent.
  • The fraction of high school dropouts who were employed fell for three full years after the recession ended.
Economists have come up with various theories to explain this phenomenon. In a downturn, many employers raise skill requirements for a given job, thereby reducing the pool of unskilled jobs available. Also, during recessions, employers reorganize and introduce new technologies -- releasing unskilled workers whose jobs have become redundant.

Furthermore, interest rate cuts by the Federal Reserve stimulate demand for new capital and consumer durables. While the rise in economic activity increases demand for new workers, because machinery is cheaper, many companies replace workers with machines, or hire fewer workers.

Source: Alan B. Krueger (Princeton University), "Economic Scene: As Recovery Builds, the Less Educated Go to the End of the Employment Line," New York Times, March 7, 2002.

For text
http://www.nytimes.com/2002/03/
07/business/07SCEN.html

For more on Unemployment
http://www.ncpa.org/iss/eco/

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