Thursday, January 30, 2014

Job Openings and America's Competitive Job Market

The Job Openings and Labor Turnover Survey (JOLTS) provides us with an interesting insight into America's job market.  According to the January 2014 data release, there was an increase in the number of total private and government sector job openings, hitting 4.001 million in November 2013 as shown here:

Note that this level is still nearly 500,000 job openings short of the level in back in 2006 - 2007.

That said, as you can see on this graph from FRED, that while the total number of job openings is up from a year ago, the number of hires is up very slightly on a year-over-year basis and is nearly 20 percent below the levels seen before the Great Recession, factors that are particularly concerning given that the economy is supposed to be much stronger this year than last:

According to the Bureau of Labor Statistics, there were 10.4 million job seekers in December 2013.  With only 4 million job openings available, that means that there were 2.6 job seekers for every job available.  

Here is a graph showing the number of unemployed workers divided by the number of job openings (i.e. the number of potential applicants for each available job opening):

Just prior to the Great Recession, over the period between the beginning of 2006 and the middle of 2007, there were between 1.5 and 1.6 unemployed Americans for every job opening.  The low point was hit in March 2007 when there were only 1.43 unemployed Americans for every job opening.  During and after the Great Recession, this ratio rose quickly, hitting a  peak of 6.7 unemployed for every job opening in July 2009.  Since then, it has fallen rather substantially, however, as you can see from the graph, the current ratio is still worse than just about any time since December 2000, excluding the Great Recession.

In actuality, the situation is far worse than these numbers show.  If Americans that are neither employed nor looking for work because of the weak labor market were added to the 10.4 million officially unemployed (the U3 unemployed), the ratio between job seekers and job openings would look far worse.  Estimates suggest that there are at least 6 million additional potential workers out there that will enter or reenter the job market once the economy looks stronger or desperation for income sets in.  If the number of job openings does not grow or even if it grows to the level seen before the Great Recession, the ratio between job seekers and job openings could rise from its current level of 2.6 to between 3.4 and 4.0, a level that has not been seen in years between 2001 and 2008.

From this data, we can see that America's job market is caught between a rock and a hard place.  Relatively low levels of job openings and a large number of officially unemployed plus the potential addition of millions of workers to the labor pool will make the job market extremely competitive, even if the economic expansion strengthens and the number of job openings increase.  Unless the number of hires increases to pre-Great Recession levels, the competition for the relatively sparse number of jobs will continue to make life difficult for out-of-work Americans.

1 comment:

  1. Why doesn't the government economists use this economic formula?