The July Job Openings and Labor Turnover Survey (JOLTS) data release this morning from the Bureau of Labor Statistics was essentially unchanged from the May and June reports. All top line measures—the rate of job openings, the hires rate, the layoffs rate, and the quits rate—have remained flat for two months in a row. In fact, the rate of layoffs has been flat since December 2013 and the quits rate has been flat since February of this year.
Figure A shows the hires rate, the quits rate, and the layoffs rate. The first thing to note is that layoffs, which shot up during the recession, recovered quickly once the recession officially ended. Layoffs have been at prerecession levels for more than three years. This makes sense; the economy is in a recovery and businesses are no longer shedding workers at an elevated rate. But for a full recovery in the labor market to occur, two key things need to happen: Layoffs need to come down, and hiring needs to pick up. Hiring is the side of that equation that, while generally improving, has not yet come close to a full recovery. The hires rate remains well below its prerecession level.
Hires, quits, and layoff rates, December 2000–July 2014
|Month||Hires rate||Layoffs rate||Quits rate|
Note: Shaded areas denote recessions. The hires rate is the number of hires during the entire month as a percent of total employment. The layoff rate is the number of layoffs and discharges during the entire month as a percent of total employment. The quits rate is the number of quits during the entire month as a percent of total employment.
Source: EPI analysis of Bureau of Labor Statistics Job Openings and Labor Turnover Survey
Another piece of the puzzle is voluntary quits (shown by the quits rate in Figure A). A larger number of people voluntarily quitting their job indicate a labor market in which hiring is prevalent and workers are able to leave jobs that are not right for them and find new ones. Voluntary quits, flat for the last six months, are also nowhere near a full recovery. There are 15 percent fewer voluntary quits each month than there were before the recession began, and the quits rate is the same as it was last October. Low voluntary quits indicate that there are a large number of workers who are locked into jobs that they would leave if they could.
No job openings for more than half of job seekers
In July, the total number of job openings was 4.7 million, unchanged from June. In July, there were 9.7 million job seekers (unemployment data are from the Current Population Survey), meaning that there were 2.1 times as many job seekers as job openings. Put another way: Job seekers so outnumbered job openings that just over half of the unemployed were not going to find a job in July no matter what they did. In a labor market with strong job opportunities, there would be roughly as many job openings as job seekers.
The job seekers to job openings ratio of 2.1 represents a break in trend, an increase from 2.0 in June (Figure B). The ratio was steadily coming down, falling from 3.0 over the last year. Taken together with the lower than expected employment number in August, it is enough to give us pause about what to expect in the future. Clearly, one month’s data cannot predict a trend, but it is reason to continue to watch these numbers in upcoming months to see whether they indicate the presence of a canary in the coal mine or simply a minor blip in trend.
The job-seekers ratio, December 2000–July 2014
|Month||Unemployed job seekers per job opening|
Note: Shaded areas denote recessions.
Source: EPI analysis of Bureau of Labor Statistics Job Openings and Labor Turnover Survey and Current Population Survey
Further, the 9.7 million unemployed workers understates how many job openings will be needed when a robust jobs recovery finally begins, due to the existence of 5.9 million would-be workers who are currently not in the labor market, but who would be if job opportunities were strong. Many of these “missing workers” will become job seekers when we enter a robust jobs recovery, so job openings will be needed for them, too.
Even further, 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 deal with a job opening. For example, if a company is trying hard to fill an opening, it may increase the compensation package and/or scale back the required qualifications. Conversely, if it is not trying very hard, it may 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. This means that when a job opening goes unfilled when the labor market is weak, as it is today, companies may very well be holding out for an overly qualified candidate at a cheap price.
Labor market weakness is still not due to workers lacking the right skills
Figure C shows the number of unemployed workers and the number of job openings by industry. This figure is useful for diagnosing what’s behind our sustained high unemployment. If our current elevated unemployment were due to skills shortages or mismatches, we would expect to find some sectors where there are more unemployed workers than job openings, and some where there are more job openings than unemployed workers. What we find, however, is that unemployed workers dramatically outnumber job openings across the board. There are between 1.1 and 6.5 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 (health care and social assistance), there are still over 10 percent more unemployed workers than job openings. 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.
Unemployed and job openings, by industry (in millions)
|Professional and business services||1.1671||0.7811|
|Health care and social assistance||0.7323||0.6528|
|Accommodation and food services||0.9936||0.5304|
|Finance and insurance||0.2688||0.2085|
|Durable goods manufacturing||0.5217||0.1758|
|Transportation, warehousing, and utilities||0.3842||0.1548|
|Nondurable goods manufacturing||0.3558||0.1030|
|Real estate and rental and leasing||0.1316||0.0512|
|Arts, entertainment, and recreation||0.2225||0.0752|
|Mining and logging||0.0530||0.0265|
Note: Because the data are not seasonally adjusted, these are 12-month averages, August 2013–July 2014.
Source: EPI analysis of data from the Job Openings and Labor Turnover Survey and the Current Population Survey