One wonky chart shows how seriously the coronavirus pandemic has disrupted the labor market
- The Beveridge curve shows that the coronavirus pandemic has disrupted the US labor market.
- The graphical chart shows the relationship between unemployment and the job vacancy rate. April data reflecting the coronavirus pandemic shutdowns shifted the curve significantly to the right.
- This is likely because of the impact of temporary layoffs, which threw off the usual balance between unemployment and job vacancies, Nick Bunker, an economist at Indeed, told Business Insider.
- As the US economy recovers, it's likely that the Beveridge curve will shift back more in line with the general trend — the same thing that happened during the Great Recession, Bunker said.
One wonky chart called the Beveridge curve shows just how much the coronavirus pandemic has hit the US labor market.
The Beveridge curve, named after the British economist William Beveridge, displays the relationship between unemployment and the job vacancy rate.
Usually, the curve slopes downward toward the bottom right-hand corner of the chart, showing that as unemployment ticks up, the number of available jobs declines — a data point at the bottom right of the curve generally indicates that the economy is in a recession, characterized by elevated unemployment and a lack of jobs.
But, when the April Job Openings and Labor Turnover Survey data was applied to the model, the Beveridge curve veered sharply to the right — not only not following the curve, but shifting it significantly. This move suggests that the labor market isn't working efficiently as there is high unemployment but also relatively high job openings.
Part of this is likely due to the high number of temporary layoffs the US is seeing from coronavirus pandemic lockdowns, Nick Bunker, an economist at Indeed, told Business Insider.
"There was a huge shock to unemployment which was driven by separations, people losing their jobs," said Bunker. That led to a spike in the unemployment rate to 14.7% in April, the highest since the Great Recession.
That shock potentially threw off the Beveridge curve because usually unemployment ticks up when hiring declines, Bunker said — a pattern generally following the slope of the curve.
At the same time, the pandemic impacted the measure of job vacancies in April, also messing with the Beveridge curve.
During lockdowns, employers didn't post open positions to account for the workers they had to furlough or lay off. Instead, they waited for the economy to reopen so they could recall their workers with a simple phone call or text — something that happened to an extent in May, when the economy added 2.5 million jobs and the unemployment rate declined to 13.3%.
Accounting for pandemic factors "solves the puzzle of what we're seeing here," Bunker said. There are a huge number of people who are jobless, but still connected to their previous employers, meaning that rehiring would be much different than what the models underpinning the Beveridge curve are signaling.
If you were to take temporary layoffs out of the count for unemployment in April, the Beveridge curve would shift back to the right and more closely fall in line with the usual trend, according to Bunker.
Going forward, it is likely that as the US economy recovers from the deep shock of the coronavirus pandemic and ensuing recession, the Beveridge curve will shift back. This also happened in the years following the Great Recession, Bunker said.