Jobless recoveries
Jul 20th 2011, 16:54 by A.M. | LONDON
SOCIAL connections help when looking for a job. In America, the slow recovery means firms are less likely to advertise vacancies, and more likely to rely on word of mouth. In Italy, jobseekers with friends in jobs are likely to find employment faster than jobseekers whose friends are unemployed.
The American research comes from Steven Davis, Jason Faberman and John Haltiwanger, who have designed an index for the “recruitment intensity” of hiring companies. Aggressive recruiters advertise positions, interview extensively and make immediate offers. Other firms rely on word of mouth and are less likely to make offers to suitable candidates. In the wake of the recession, the index fell to its lowest in a decade:
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It slipped below the levels of the previous recession by early 2007 and has not recovered since. Employers are apparently unwilling to expend time or money to fill vacancies, safe in the knowledge that there is an excess supply of qualified candidates. This may be one reason that the rate of exit from unemployment in America is half that of the last recession. Other countries have not seen such as rapid decline.
The Italian research, by Alfonso Rosolia and Federico Cingano, overcomes an endogeneity problem. Of course jobseekers with employed friends are likely to find jobs faster; they likely share qualities, like educational and professional experience, with their employed friends. However, Mr Rosalia and Mr Cingano control for this by examining employees with equal qualification levels, made redundant by the same company at the same time. Those with more employed friends still tend to find new employment faster, apparently due to the informational advantages of having friends in jobs who learn about vacancies.
This makes high-unemployment recessions particularly damaging in the long term. They break informational social networks through which jobseekers are directed to vacancies. As unemployment rises within a social network, it disrupts one of the avenues by which members of the network may find a new job.
We already know it pays not to be young or unemployed if you are looking for a job. Apparently it is not wise to have unemployed friends either. The message is bleak: the slow recovery is likely to increase social immobility.
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