Beveridge curve

For example, recessionary periods are indicated by high unemployment and low vacancies, corresponding to a position on the lower side of the 45° line, and high vacancies and low unemployment indicate the expansionary periods on the upper side of the 45° line.

Dow and Dicks-Mireaux presented the unemployment and vacancy data in an unemployment-vacancy (UV) space and derived an idealised UV-curve as a rectangular hyperbola after they had connected successive observations.

[6] The Beveridge Curve can move for the following reasons: Skill shortages should not be confused with "labour shortages", which identify an objective lack of workers in the market, independently of their skills, and it may arise because of limited geographical mobility, ageing populations or a labour market approaching full employment during an economic boom.

Nevertheless, even in presence of unemployment and assuming that there is adequate demand for labour in the market, it could still be difficult to point to a skill shortage for at least two reasons: if whether the unemployment we observe is frictional (just a short-term consequence of costly "search"), cyclical (caused by the business cycle) or structural cannot be established or if whether the position offered is accessible and/or attractive (such as whether or not the wage posted is competitive or at least rising with respect to other segments of the market that are not reporting unmet labour demands) cannot be established.

Economists generally believe that labour markets adjust to such imbalances, especially over time, but it is also possible for such mismatches to persist for many years or decades.

In such instances, adverse equilibria, characterized by more structural unemployment, long-term unfilled vacancies and/or lower labour force participation may arise, and employers may eventually be forced to hire workers who possess lower or just different skills, giving place to the mismatch "on the job".