of the recent increase in long - term unemployment. similarly, the fact that labor demand appears weak in most industries and locations is suggestive of a general shortfall of aggregate demand rather a worsening mismatch of skills and jobs. counterexamples like the energy boom in the upper midwest, where there may be some mismatch in the geographic location of suitably skilled workers or an overall shortage of potential workers with relevant skills, might best be interpreted as the exceptions that prove the rule ; a mismatch story would suggest that strong labor demand would be appearing in more sectors or geographical areas by now. an empirical relationship that economists have long used to interpret developments in the labor market is known as the beveridge curve ( figure 14 ). that curve – named after the british economist william beveridge – compares unemployment ( the number of workers looking for employers ) to job vacancies ( the number of workers that employers are seeking ). in good times, when the unemployment rate is low, businesses are growing and workers are harder to find, so job vacancies tend to be high. similarly, in bad times, unemployment is high and few jobs are available ( vacancies are low ). thus, the beveridge curve, the relationship between unemployment and vacancies, is downward sloping. on the usual interpretation, a recession is a period in which the economy is moving down along the beveridge curve ; as output and the demand for labor fall, job vacancies decline and unemployment rises. in contrast, changes in the structural determinants of unemployment are thought to be reflected in shifts of the beveridge curve to the left or right. for example, suppose that, because of changes in technology or in the mix of industries and jobs, the mismatch between the skills of the unemployed and the needs of employers worsens. then, for a given number of job openings, the number of the unemployed who are qualified for those jobs is smaller and the unemployment rate is higher than it would have been before the mismatch problem worsened. graphically, an increase in a skills mismatch would be reflected in a shift of the beveridge curve up and to the right. from figure 14, we can see some outward shift in the relationship between job vacancies and unemployment, consistent with some increase in structural unemployment since the onset of the recession. however, a more in - depth analysis of the evidence suggests that the apparent shift in the

hiring plans have also shown modest gains ( figure 6 ). other indicators, such as new claims for unemployment insurance and measures of the breadth of hiring across industries, also point to better labor market conditions. notwithstanding these welcome recent signs, the job market remains quite weak relative to historical norms, as i ’ ve already noted. after nearly two years of job gains, private payroll employment remains more than 5 million jobs below its previous peak ; the jobs shortfall is even larger, of course, when increases in the size of the labor force are taken into account. and the unemployment rate in february was still roughly 3 percentage points above its average over the 20 years preceding the recession. moreover, a significant portion of the improvement in the labor market has reflected a decline in layoffs rather than an increase in hiring. this last observation is illustrated by the data on gross job flows ( figure 7 ). the monthly increase in payroll employment, which commands so much public attention, is a net change. it equals the number of hires during the month less the number of separations ( including layoffs, quits, and other separations ). in any given month, a large number of workers are being hired or are leaving their current jobs, illustrating the dynamism of the u. s. labor market. for example, between 2001 and 2007, private employers hired nearly 5 million people, on average, each month. total separations, on average, were only slightly smaller. taking the difference between gross hires and separations, the net monthly change in payrolls during this period was, on average, less than 100, 000 jobs per month – a small figure compared to the gross flows. the recent history of these flows suggests that further improvement in the labor market will likely need to come from a shift to a more robust pace of hiring. as figure 7 shows, the declines in aggregate payrolls during the recession stemmed from both a reduction in hiring and a large increase in layoffs. in contrast, the increase in employment since the end of 2009 has been due to a significant decline in layoffs but only a moderate improvement in hiring. to achieve a more rapid recovery in the job market, hiring rates will need to return to more normal levels. the change in unemployment and economic growth : a puzzle? what will lead to more hiring and, consequently, further declines in unemployment? the short answer is more - rapid economic growth. indeed, the improvement in the labor market over the past year – especially the decline in