Following news coverage can be easy. Understanding some of the terms it uses, less so. In our Flashcard series, The Atlantic explains ideas you may read about but never see spelled out. In this installment, we dig into the nature of our unemployment crisis.
Thanks to the violent explosion of the housing market and the financial industry, nearly 17 percent of the labor force -- roughly the population of New York and Virginia combined -- are either unemployed or forced to work part-time. In the past year, a war has broken out in Congress over how much more money can help.
Underlying this debate is a deeper question about the nature of the unemployment crisis. Is it "cyclical," a problem of low demand, which more money could solve? Or is the problem "structural," a mismatch of workers' skills and employers' needs -- a problem that more money won't automatically solve?
Imagine the economy is a bagel bakery struggling through a slow week. One manager says: Once everybody gets their paychecks on Friday, we'll see the lines return. The other manager says: No, everybody's sick of bagels. Even when they get paid, they'll skip the bakery.
The first manager represents the case for cyclical unemployment. It's about demand, which will "cycle" back. The second manager represents the case for structural unemployment. It's not just about demand coming back, it's about demand moving to other goods.