The Beveridge Curve is a curve used to describe how job vacancies and unemployment change in an economic cycle, and can be used to help distinguish different types of unemployment such as frictional unemployment, structural unemployment, and cyclical unemployment.
Introduction to Beveridge Curve
The Beveridge Curve was first discovered by British economist William Beveridge in 1944, because he noticed a stable interaction between unemployment and vacancies. relationship, and use a curve to describe this stable relationship between them. Later, this curve was called the Beveridge curve (also known as the UV curve), and together with the Phillips curve, it became the starting point for Western economists to study unemployment and labor market problems.
The Beveridge Curve is a curve used to reflect changes in job vacancies and unemployment, and can be used to help distinguish between frictional, structural, and cyclical unemployment. The horizontal axis of the curve represents the job vacancy rate in the economy, and the vertical axis represents the unemployment rate. The 45-degree line represents the line where the job vacancy rate equals the unemployment rate—full employment in general.
In the case of frictional unemployment, although there are many vacancies, people are unemployed because it is difficult to find the ideal job. In structural unemployment, the skills of the workforce looking for work do not match the skills required for the vacant positions. When the economy is uncertain, companies have job openings but do not commit to hiring due to concerns about the economic outlook.
Conversely, a left shift of the Beveridge curve occurs when the same job vacancy rate corresponds to a lower unemployment rate. This is mainly driven by improved matching efficiency (a weakening of frictional and structural unemployment) and a positive economic outlook.
Difference between Beveridge Curve and Phillips Curve
The Beveridge curve is a curve that reflects the negative correlation between the unemployment rate and the job vacancy rate in the labor market, but it is significantly different from the Phillips curve. The Phillips curve is mainly used for the aggregate analysis of unemployment and labor market problems, and the Beveridge curve has a unique role in analyzing unemployment and labor market structural problems, because the existing ones are mainly caused by employment structural factors.
Changes to the Beveridge Curve in the post-pandemic U.S.
The U.S. job market, which was severely damaged by the impact of the pandemic in early 2020, recovered quickly under the easing and stimulus policies of the Federal Reserve and the U.S. government, but we would be surprised to find that the same unemployment rate corresponds to a substantial increase in job vacancies. For example, the 3.5% unemployment rate in July 2022 corresponds to 11.239 million job vacancies, but in March 2020 the 3.5% unemployment rate corresponds to only 6.963 million job vacancies.
Mainly because: 1. In the context of the epidemic, factors such as remote employment, virus concerns, and fiscal benefits have reduced the efficiency of job matching, exacerbating frictional and structural unemployment; 2. Strong recovery in aggregate demand under loose monetary and fiscal policies , the demand for corporate recruitment is strong.
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