All economic statistics are useful, but they are all incomplete. It should be consumed with caution. Consider the unemployment rate, a key indicator of the U.S. labor market. The U.S. unemployment rate has been below 4% since December 2021. As you can see from the graph showing unemployment rates going back to 1948, there was a sustained period in the early 1950s, followed by another period in the late 1960s. When unemployment rates have been this low for this long. But for half a century, from 1970 to 2020, the U.S. economy could only dream of an unemployment rate below 4% for 15 consecutive months.
Is it reasonable to interpret this unemployment rate as an indication of the historically great U.S. labor market? Or is it somehow the case that the current unemployment rate captures the essence of what is happening in the U.S. labor market? Is it more reasonable to assume that it is not?
In January 2024, 40 labor market economists met at the Hutchins Center on Fiscal and Monetary Policy at Brookings to discuss this issue and more. Louise Sheiner, David Wessel, and Elijah Asdourian provide an overview paper explaining this debate.Post-COVID-19 US labor market: What has changed and what has stayed the same?The first question they address is: „What is the best measure of labor market slack?“
Scheiner, Wessel, and Asdoulian write: The unemployment rate in 2023 was about the same level as in 2019, but other slack indicators suggest the labor market is even tighter. ” Specifically, one of these “other measures” is the number of job openings (also known as the number of vacancies) divided by the number of unemployed people (sometimes abbreviated as V/U).
As you can see, during the worst of the Great Recession in 2009 and the pandemic recession, there were about 0.2 job openings for every unemployed person. Just before the pandemic recession, there were about 1.2 job openings for every unemployed person. Immediately after the pandemic recession, the number of job openings per person jumped to 2.0, but has since returned to 1.4.
This number explains why a pre-pandemic unemployment rate of less than 4% is not the same as a post-pandemic unemployment rate of less than 4%, and why there has been a marked increase in the number of job openings per unemployed person since the pandemic. Help explain. The spike in the V/U ratio in early March also explains why inflation started rising around that time, just as the decline in V/U explains the easing of inflation pressures over the past year or so. may be helpful.
However, there are questions about what exactly is being captured by the measure of „job openings.“ This is based on data about jobs posted by employers. However, in the era of Internet job searches, the cost for companies to post job information has become cheaper, which may have made companies more likely to post job information. Pandemic-related employment changes, especially for companies now willing to hire remote workers, may also change the fundamental meaning of „job openings“ statistics. The total number of job openings appears to be on the rise.
A similar point has been made in discussions by labor economists.
Other participants opposed relying on V/U, primarily due to skepticism about the reliability of vacancy indicators. Julia Coronado of MacroPolicy Perspectives and colleagues pointed out that the recent increase in V/U is difficult to distinguish from the trend of increasing vacancies that began around 2008. Former Bureau of Labor Statistics Commissioner Erica Groshen said vacancies are increasing across the country. Because digital technology has made it much easier to post job openings. „When I applied to college, my high school told me, 'You can apply to five colleges,'“ she said. „…my kids were told they were going to 12 universities because they were computerized, but I think they're saying the next generation will go to about 20 universities.“ V/U's Critics argued that the raw data, without taking into account the long-term growth in vacancies, could not inform the ongoing debate about labor market tightness.
Another way to look at the labor market is based on how people leave jobs. Basically, there are two main reasons why people quit their jobs. Voluntary separation (blue line), known as „quitting“, and involuntary separation (red line), known as „termination/dismissal“. As this chart shows, layoffs increased during the recession and skyrocketed during the pandemic. But the number of retirees was increasing before the pandemic and soared to new highs after the pandemic. This is sometimes referred to as „mass resignation,“ or when people choose to quit their jobs.
The increase in the number of retirees suggests a different pattern for the contemporary U.S. labor market. Many of us are accustomed to the mental model of workers transitioning into unemployment and then returning to employment. But what happens to people who leave their jobs to take up new jobs and never experience the curse of unemployment? Or do they temporarily leave the labor market and then re-enter it, but are counted as „unemployed“ during that time? Are there people who don't? Current Population Survey Statistics Let's take a look at the flow to work. Statistics show that 1) the number of people moving from employment in one location to employment in another is increasing (pictured above); 2) The number of people moving from unemployed to employed is about the same (second figure). 3) There has been a small increase in the number of people moving from the non-labor force into employment.
Some of these patterns are mixed. The U.S. economy appears to be seeing an increase in the number of people who are already employed and leaving for jobs with other employers. When faced with this situation, a reasonable response for employers is to post more vacancies. In some cases, companies may not feel the need to hire in the short term, but they want to have an available applicant pool in the event of a loss of an employee, and they want to ensure they have suitable candidates. If a person appears, we will actively hire them.
Taken together, these statistics suggest that the U.S. economy is indeed doing well in terms of job security. But this also means that many workers are seeking different, better, and more It also suggests that you are looking for a high-paying job. Housing loan.