From June to July 2021 (the latest available data), the number of job openings was up 749,000 to 10.9 million, the highest level since the U.S. Bureau of Labor Statistics started keeping such records in December 2000. The largest increases in available positions occurred in health care and social assistance (+294,000), finance and insurance (+116,000), and accommodation and food services (+115,000).
The labor market is back into territory where there are more jobs available than unemployed people. It is interesting to compare the pattern after the Great Recession, when major structural problems slowed the recovery, to what happened with the pandemic. Unemployed persons per available job were around 1.5 through much of 2006 and 2007, then peaked at 6.5 in July 2009. It wasn’t until April 2015 that the pre-recession ratio was restored.
The ratio of unemployed people to jobs was actually less than one through 2018 and 2019 (which had never happened before), reaching a low of 0.8 in many months including February 2020. In April 2020, it spiked to 5.0 unemployed people per opening, but just five months later, dropped to two and was again less than one by May 2021. As of late, there have consistently been more jobs than unemployed individuals. The bottom line is that, with or without the recent disruptions, we have a long-term labor shortage.
One problem is the stubbornly low labor force participation rate, which measures the proportion of the working-age population that is either working or actively seeking work. After increasing over several decades as females joined the workforce, this rate peaked at 67.3% in 2001, followed by a gradual period of decline that brought it to 62.5% in late 2015. After that point, there was modest strengthening, reaching 63.3% just prior to the pandemic. In April 2020, it dropped to 60.2% and is now 61.7%. The COVID chaos caused many people to simply stop looking, at least temporarily.
For a variety of reasons, including virus fears, childcare challenges, stimulus payments, and skills mismatches, these individuals (about 1.6% of the working-age population) may be slower in returning, and a sliver will not ever return. As discussed in a recent column, demographics and restrictive immigration policies are also ongoing issues. Overcoming the tight labor market will involve a variety of responses, from greater use of technology to bringing some of the almost 40% currently not working off the sidelines through better pay and benefits to more reasonable programs to import workers.
Historically high numbers of openings are beneficial for job seekers with the requisite skillsets. For companies needing employees, however, problems persist. Fortunately, in a market-driven system, the emergence of a problem simultaneously unleashes the incentives to solve it. Stay safe!