Rosemary Cabelo uses a computer at a public library to access the Affordable Health Care Act website on Dec. 11, 2013, in San Antonio.

The Scariest Graph the CBO Released Today

A new CBO report has partisans up in arms, but anyone can agree the job market isn’t looking great.

Rosemary Cabelo uses a computer at a public library to access the Affordable Health Care Act website on Dec. 11, 2013, in San Antonio.

The Congressional Budget Office estimates that Obamacare could mean fewer people searching for jobs.

By SHARE
Today, while it was telling us that Obamacare could mean fewer workers and a slowing economy would push deficits up, the Congressional Budget Office also put out a report about the labor market's slow recovery (cleverly titled "The Slow Recovery of the Labor Market"). Here is a look at exactly how messed up the labor market has become, all packed into one chart:

[READ: CBO: Deficit to Shrink, Recovery to Slow, Obamacare to Mean Fewer Jobs]

140204_cbo1
(Congressional Budget Office)
It’s not a simple up-and-down plotting of the jobless rate over time, but it displays one crucial point about the job market: It’s just not what it used to be. The chart at left is the Beveridge curve, a plot of the share of unemployed Americans versus how many jobs are open.

Barring any major economic shifts, the labor market generally travels up and down the curve, but the curve itself does not move. It’s painful when the jobless rate gets higher under these circumstances, but it also tends to mean that demand is simply low for goods and services.

But as the above curve shows, there was a big shift outward after July 2009 – meaning that even though the current job vacancy numbers are similar to only a few years ago, the unemployment rate is now higher.

[ALSO: Alongside Income Gap, Internet Gap Remains Wide]

All sorts of reasons could contribute to this, according to the CBO: The stigma of long-term unemployment, for example, could be keeping some would-be workers out of all those vacancies. Likewise, the long-term unemployed could be losing valuable job skills as they sit idle. In addition, a skills mismatch may be at work. And as some have suggested, employers – sensing they have their pick of plenty of qualified candidates – are taking their time sifting through the stacks of resumes. 

It also could be possible that extensions of jobless benefits helped push the unemployment rate up, the CBO says, as people continued applying for jobs in order to stay in the labor force and continue collecting benefits. However, those effects started tapering off in 2013, as people began exhausting their benefits, according to the CBO.

What it means is that getting the job market back to where it once was will be a matter that involves far more than boosting growth and, therefore, demand. The jobless rate, at 6.7 percent, is roughly 2 full points higher than it was at the end of 2007. According to the CBO, structural factors – things like a broad skills mismatch that is unrelated to the business cycle – account for half that.

Those structural factors, unfortunately, are tricky to solve. It could mean job training, and it could mean pushing employers to hire the long-term unemployed, as President Barack Obama is attempting to do. But they could take years to solve – the CBO predicts that the problems affecting the long-term unemployed won't start to disappear until after 2017.