But saying it's the current state of the economy (which I agree with, by the way) doesn't really line up with your argument that lack of skills is a major factor.
I try to hold to ideas that are, at least, testable.
When we speak of stagflation , we are discussing two things, unemployment and inflation. I'm just making note of that as a check that I don't inadvertently add to taking things off topic. Unemployment leads to the question of whether we are looking at structural or frictional issues. And, changes may show up in the labor force participation rate which has declined since about 2001. Something has been going on for a good decade.
There are a number of articles that address this.
www.bls.gov/opub/mlr/2006/10/art3full.pdf
Trends in labor force participation
www.prb.org/pdf08/63.2uslabor.pdf
U.S. Labor Force Trends 2008
www.kc.frb.org/publicat/econrev/pdf/12q1VanZandweghe.pdf
Interpreting the Recent Decline in Labor Force Participation
http://research.stlouisfed.org/publications/review/08/01/DiCecio.pdf
Changing Trends in the Labor Force: A Survey 2008
http://ftp.iza.org/dp2991.pdf
What Explains Trends in Labor Force Participation of Older Men in the United States?
These might shed some light on things.
It becomes a question of degrees, magnitudes, as well. There are always some structural changes going on, but if it is a major factor is questionable.
The economy changes incrementally, at the margin. And the trend is the difference between two factors, 100 of one vs 110 of another. 100 jobs added in food service and 110 added in phlebotomy is a trend of 10 in medical services.
A large portion of the unemployment, even the lack of entry into the labor force, is among the 19-25 age group. Are they no finding jobs because there is a lack of demand for unskilled labor products? Is it because there is demand that is being taken up by older or even non-citizen labor? Is it because there is potential demand for skilled labor in medical services? How do we even measure potential demand? The proof is in the pudding, as they say, so we really don't know that there was potential demand until it gets filled. And it can be a combination, sluggish demand due to lack of flow of money that, should it exist, would purchase the services provided if there were workers to provide it.
What I do know for sure is that there is a demand for phlebotomists that will find work after doing a year of volunteer work. There is a demand for trained medical technologist and administration assistant. There is a demand for truckers, free training for an 8 month contract will get a job. And there are opening in established products like grocery stores. Which is adding more faster becomes the question. Which is adding jobs at a rate above normal population grower is more to the point.
The not in the labor force percentage is extremely low in the 30 to 35 year old category. It is excessive in the 19-25 and high in the 60-65 year old categories. A major net flow is from employment to retirement. It is suggestive just looking at the flow and if you ask the BLS, they say that this is correct.
That 19-25 year old category is an indicator of a lack of skills. Though, the displacement by immigrant workers begs the question as to whether to interpret it as a lack of jobs or excess labor.
This is the direction that things are lining up for me. Some of it becomes an issue of where to draw the line between to categories which are a bit fuzzy. Some of it is a matter of it becomes an issue of not being able to really tell what the rate of change is.
I don't have a definitive description of the difference between structural, frictional, and simply depressed economy unemployment. I read a statement that the first two are not simply exclusive. Frictional unemployment is defined as the market trying to match the skills to the job. But, where do we draw the line when it comes to skilled vs unskilled? Is a retail cashier a skilled position? Do bank tellers really need a bachelor's degree? Employers want a drop in fit. What about transferable skills? If employers are not hiring people with transferable skills, is that a lack of training or frictional unemployment.
Oh, and 7.5% was considered to be the natural rate back in the stagflation of the '70s. So is 8.5% that much different?
Oh, and back in the '60s, women were a much smaller part of the workforce, with the labor force and the employment rate being far lower than it is today.
Oh, and here is the perception that really gets me with the economy. Typical control systems seek a steady state at some fixed level. The economy is a constantly growing system, increasing population, efficiency, standard of living, and CPI. The employment rate has been relatively flat, employment just growing with population. If the economy were at "full employment". This is exactly what it would do. So, it is at some steady state condition.
Lacking a definitive description, I accept fuzzy rather than inadvertently force a distinction that I later have to undo. So, yes, I am intentionally allowing the two to not line up.
Have you ever seen a clothing material that is made up of blue and red threads. When you look at it from a distance, it appears purple. It isn't blue, it isn't red, and it really isn't even purple. What color do I call it? Do I describe it as blue and red? If it is 60% red and 40% blue, is it correct to call it red?
I'm comfortably uncomfortable with Shrodinger's Cat being both dead and alive simultaneously.
So, for now, the economy seems to be sitting at the steady state. It has been there for about two years. Clearly, it is not going to jump from 8.5% to 5% overnight. So I accept being comfortably uncomfortable with a slowly changing natural rate with underlying structural changes that cannot be distinguished, at the margin, from underemployment, decreased labor utilization and frictional unemployment.
So, yeah, you are so right, it isn't lining up well.
