Weekend Economists MLK Remembrance January 20, 2014

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12. No Job Openings for More than Three Out of Five Job Seekers

http://www.epi.org/publication/job-openings-job-seekers/

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.