The July Job Openings and Labor Turnover Survey (JOLTS) data released this morning by the Bureau of Labor Statistics continue to paint a dismal picture of job opportunities. What job seekers need is for hiring to pick up. Thus, arguably the best way to judge the relative strength of job opportunities is to examine the trend over time in the hires rate—i.e., the share of total employment accounted for by new hires—which is shown in Figure A. It depicts how hires dropped off a cliff in the Great Recession, improved very modestly between the middle of 2009 and early 2012, and has made no sustained improvement over the last year and a half, since February 2012.
Hires rate has not recovered from historic plunge: Hires rate, December 2000–July 2013
Note: Data are monthly, beginning in December 2000 and ending in July 2013. Shaded areas denote recessions.
Source: EPI analysis of Job Openings and Labor Turnover Survey and Current Population Survey public data series
The level of job openings remains very depressed, falling by 180,000 to 3.7 million. In 2007, there were 4.5 million job openings each month, so July’s level of 3.7 million is more than 17 percent below its prerecession level.
Figure B shows the number of unemployed workers and the number of job openings by industry, averaged over the last 12 months. It’s worth noting that this figure is extremely useful for diagnosing what’s behind our sustained high unemployment. If, for example, our current elevated unemployment were due to skills shortages or mismatches, we would expect some sectors would have more unemployed workers than job openings, and others would have more job openings than unemployed workers. What we find, however, is that unemployed workers dramatically outnumber job openings across the board. There are between 1.4 and 10.2 times as many unemployed workers as job openings in every industry. In other words, even in the industry with the most favorable ratio of unemployed workers to job openings (finance and insurance), there are still 35 percent more unemployed workers than job openings. In no industry does the number of job openings even come close to the number of people looking for work. This demonstrates that the main problem in the labor market is a broad-based lack of demand for workers—not, as is often claimed, available workers lacking the skills needed for the sectors with job openings.
Furthermore, a job opening when the labor market is weak often does not mean the same thing as a job opening when the labor market is strong. There is a wide range of “recruitment intensity” with which a company can approach a job opening. If a company is trying hard to fill an opening, it may, for example, increase the compensation package and/or scale back the required qualifications. If it is not trying very hard, it may, conversely, hike up the required qualifications and/or offer a meager compensation package. Perhaps unsurprisingly, research shows that recruitment intensity is cyclical; it tends to be stronger when the labor market is strong and weaker when the labor market is weak, and the labor market is currently very weak. This means that when a job opening goes unfilled when the labor market is weak like it is today, it may very well be due to the company holding out for an overly qualified candidate at a very cheap price.
Number of unemployed far outstrips number of available jobs across the board: Unemployed and job openings, by industry (in thousands)
|Professional and business services||661.4||1324.833|
|Health care and social assistance||602.4||884.250|
|Accommodation and food services||410.6||1190.750|
|Finance and insurance||215.6||291.250|
|Durable goods manufacturing||158.9||646.083|
|Transportation, warehousing, and utilities||124.8||403.500|
|Nondurable goods manufacturing||90.5||417.750|
|Real estate and rental and leasing||62.0||150.167|
|Arts, entertainment, and recreation||53.9||247.000|
|Mining and logging||19.1||64.083|
Note: Because the data are not seasonally adjusted, these are 12-month averages, August 2012–July 2013.
Source: EPI analysis of data from the Job Openings and Labor Turnover Survey and the Current Population Survey
In July, the total number of job seekers, which declined by 263,000 from June, was 11.5 million (unemployment data are from the Current Population Survey and can be found here). The “job-seekers ratio”—the ratio of unemployed workers to job openings—slightly increased in July to 3.1-to-1. The ratio has been 3.0-to-1 or greater since October 2008, more than four-and-a-half years ago. A job-seekers ratio above 3-to-1 means there are no jobs for more than two out of three unemployed workers. To put today’s ratio of 3.1-to-1 in perspective, the highest the ratio ever got in the early 2000s downturn was 2.9-to-1 in September 2003. In a labor market with strong job opportunities, the ratio would be close to 1-to-1, as it was in December 2000 (when it was 1.1-to-1).
The JOLTS data are a regular reminder that there is always a great deal of “churn” in the labor market. When we learn, as we did last Friday, that the labor market added 169,000 jobs in August, it is important to remember that this is a net change, which masks a lot of shuffling. Over the last year, an average of 4.3 million workers were hired every month, and an average of 4.2 million workers either left their jobs voluntarily or were laid off every month. These hires and separations numbers, however, are currently very low; when the labor market is stronger, there is much more churn. For example, in 2006 and 2007, there were 5.3 million people being hired and 5.1 million people separating from their jobs (i.e., leaving their jobs or being fired) each month on average.
The reason there is less churn today is that job opportunities are so scarce that employed workers are much less likely to quit the job they have. In 2006 and 2007, nearly 3 million workers voluntarily quit their jobs each month. That dropped to a low of 1.6 million in September 2009. It has since increased somewhat, but is still extremely low. In July, 2.3 million workers voluntarily quit their jobs, an increase of 63,000 from June. Because leaving a job for a better opportunity can be an important way for workers to advance, this persistent depressed rate of voluntary quits represents millions of lost opportunities.
— With research assistance from Hilary Wething and Alyssa Davis