U.S. unemployment will stay high for some time, in part because changes in the labor market have made it tougher for those out of work to find jobs, a Federal Reserve Bank of Cleveland economist said on Monday.
While cyclical factors are responsible for the increase in the unemployment rate, structural factors are largely responsible for its persistence, Cleveland Fed economist Murat Tasci said. The unemployment rate registered 9.4 percent in December, and economists expect it to rise to 9.5 percent this month.
Even if it's cyclical, as I think it is, it doesn't necessarily mean that this high level of unemployment is going to go away any time soon, Tasci said in an interview. Slower worker reallocation and weaker-than-normal GDP growth during the recovery so far might be two major reasons.
Some policymakers have suggested that structural changes in the economy have created a mismatch between the skills that job-seekers have and those that employers want. The upshot, these policymakers say, is that the ability to influence the unemployment rate via monetary policy is limited.
Minneapolis Fed President Narayana Kocherlakota has suggested the natural rate of unemployment, long pegged at 5 percent, could now be as high as 8 percent.
Tasci said identifying the natural rate of unemployment -- and thus the level near which wage and inflationary pressures could be expected to build -- is beyond the scope of his research.
But even if slower labor market turnover can be blamed on a skills mismatch or other structural factors, Tasci said, it does not follow that the Fed's current $600 billion bond-buying program will be ineffective.
Anemic economic growth is also keeping the unemployment rate well above desirable levels, he said.
A stronger GDP growth might bring you there faster, Tasci said.
Recent research from the San Francisco Fed suggests that the Fed's bond-buying programs, including the ongoing one, as well as the $1.7 trillion program that ended last March, will add 3 percentage points to GDP growth.
The U.S. jobless rate has stayed above 9 percent for the past 20 months, the longest period of high unemployment since the Great Depression. (Reporting by Ann Saphir; Editing by Dan Grebler)