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Job openings and the Beveridge Curve

The Beveridge curve is a plotted graph that illustrates the relationship between the unemployment rate and job openings or vacancy rate. According to the Bureau of Labor Statistics, the March 2014 job openings rate remains the same at 2.8 percent from March 2013 and the unemployment rate is 6.7 percent from 7.5 percent in March 2013.

Job openings and the Beveridge Curve
Bureau of Labor Statistics

The Beveridge Curve was developed by in 1958 by Christopher Dow and Leslie Arthur Dicks-Mireaux whose initial statistical methods were later expanded by economists at the National Institute of Economic and Social Research (NIESR) in London to include the following classifications of unemployment:

Deficient-demand (cyclical) unemployment

Structural unemployment

Frictional unemployment

Graphic interpretation of the Beveridge Curve

Plot points represent statistical figures based on how fast workers find new jobs based on skills that match job requirements, skill mismatch, labor force participation rate, long-term unemployment, frictional unemployment and economic and policy uncertainty.

Plot points closest to the center or origin of the curve show improvements in the job matching process based upon the skills of the employee and the requirements for the job. Frictional unemployment (due to employee job resignations, job losses and job creation) would also reflect scatter plots towards the center or origin when companies reduce their search for employees and there is a low number in the unemployment rate.

Points shifting outward from the center or origin of the curve show problems in the labor force resulting from skill mismatches between job requirements and those unemployed. Unemployment rate is another factor that would shift the scatter plots outward as well as those who have been unemployed long term. Economic and policy uncertainties also cause many employers to hold job vacancies even longer in their search for the right candidate resulting in scatter plots away from origin of the line.

According to the May 13 release from the editor’s desk at the Bureau of Labor Statistics, each month’s scatter point on the curve beginning from the December 2007 recession through December 2009, showed a lower and an outward movement to the right as jobs decreased and the unemployment rate rose. From 2010 to the present, the points moved up and to the left as job openings increased and unemployment decreased.

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