The Job Openings and Labor Turnover Survey (JOLTS) data released this morning by the Bureau of Labor Statistics showed that job openings increased by 60,000 in January, bringing the total number of job openings to 4.0 million. In January, the number of job seekers was 10.2 million (unemployment data are from the Current Population Survey). Thus, there were 10.2 million job seekers and only 4.0 million job openings, meaning that more than 60 percent of job seekers were not going to find a job in January no matter what they did. In a labor market with strong job opportunities, there would be roughly as many job openings as job seekers. We are not in a strong labor market.

Furthermore, the 10.2 million unemployed workers understates how many job openings will be needed when a robust jobs recovery finally begins, due to the existence of 5.7 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.

Rate of hiring has seen no improvement in nearly two years

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 one of the best comprehensive measures of the strength of job opportunities because it incorporates two components: 1) net new hires, and 2) new hires that are due to churn (discussed below). Figure A 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, nearly two years ago.

Labor market churn

JOLTS data are a regular reminder that there is always a great deal of churn in the labor market. Between January 2013 and January 2014, the labor market added an average of 189,000 jobs per month, but that is a net change, which masks a lot of shuffling. In particular, over the last year an average of 4.5 million workers were hired every month, and 4.3 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, there were 5.3 million people being hired and 5.1 million people separating from their jobs 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, nearly 3 million workers voluntarily quit their jobs each month. That dropped to a low of 1.6 million in August 2009. It has since been increasing, but it is still extremely low relative to before the Great Recession and progress is bumpy and slow. In January, the number of voluntary quits declined by 42,000, to 2.4 million. The level of quits has seen no sustained improvement since September. 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. 

Today’s weak labor market is not because workers don’t have the right skills

Figure B 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 1.2 and 7.6 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 more than 20 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.