The Job Openings and Labor Turnover Survey (JOLTS) data released this morning by the Bureau of Labor Statistics showed that job openings increased by 70,000 in November, bringing the total number of job openings to 4.0 million. However, there were 10.8 million job seekers in November (unemployment data are from the Current Population Survey and can be found here). That means there were 2.7 job seekers for every job opening in November. In a labor market with strong job opportunities, the ratio would be close to 1-to-1. November’s ratio of 2.7-to-1 means that for more than three out of five job seekers, there simply are no jobs.

Furthermore, the improvement in the ratio of job seekers to job openings in this recovery (from a peak of 6.7-to-1 in July 2009) overstates the improvement in job opportunities. Most of the decline in the number of job seekers is because roughly 6 million would-be workers are sidelined; they are neither employed nor looking for work due to the weak labor market. These “missing workers” are thus not counted as unemployed, but many will become job seekers when a robust jobs recovery finally begins, so job openings will be needed for them, too.

Figure A shows the number of unemployed workers and the number of job openings by industry. This figure is extremely 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 1.3 and 8.5 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 (finance and insurance), there are still nearly 30 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.

Labor market churn

The JOLTS data are a regular reminder that there is always a great deal of “churn” in the labor market. Over the last year, the labor market has been adding around 180,000 jobs per month, but this is a net change, which masks a lot of shuffling. In particular, over the last year an average of 4.42 million workers were hired every month, and 4.25 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 October 2009. It has since increased, but is still extremely low relative to before the Great Recession. In November, 2.4 million workers voluntarily quit their jobs. 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. 

One of the best ways to judge the relative strength of job opportunities over time is to examine the hires rate—the share of total employment accounted for by new hires. This is an important comprehensive measure of the strength of job opportunities because it incorporates two components: 1) net new hires, and 2) new hires that are due to churn. Figure B shows the hires rate each month over time. It fell dramatically in the Great Recession, saw some very modest improvement between the middle of 2009 and early 2012, but has made no sustained improvement since February 2012.

— With research assistance from Alyssa Davis