In a recent post, I looked at one measure of current job market slack. I've reproduced the graphic from that post below. It shows the difference between the number of unemployed persons and the number of job openings.
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| Unemployed minus Job Openings since 2008 (in millions) |
What this shows is that there are still over seven million more unemployed than there are job openings, down from a peak of around 13 million at the end of 2009. To get some perspective on this number, I extended the line as far out as the data allow. The graphic below is the same measure from 2001 to present.
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In this graphic, we can see the recovery after the 2001 recession. There is no demographic story here. No "baby-boomers exiting the workforce" explanation is possible here. Neither is there a population growth story here. For population to explain this difference, for example, the US population would have to be roughly twice the level it was ten years ago.
To really show what I and others mean by "slack," we have one other measure to observe. The chart below is total unemployed persons divided by total job openings.
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Unemployed Persons per Job Opening since 2008
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What we see here is that there are still three unemployed persons for each job opening. This is what I mean when I say that employers enjoy market power in the labor market. This is why, for example, wages are under no upward pressure. Who would dare ask for a raise under these conditions?
Another notable observation, regarding the "great vacation" theory of unemployment: What do you suppose happened in early 2008? Either the jobs were pulled out from under the workers (decrease in job openings), or many more people began to look for work (the exact opposite of the "great vacation" theory).
We can also put the Employer Market Power Ratio in perspective as well. For these data, we can all the way back to 2001 as well.
What we see here is that the ~3 persons per opening of today is roughly equal to the worst time after 2001.
The elephant in the room in this analysis is that all of these metrics use Total Unemployed Persons, which is an entirely inadequate measure, but it's all we've got for now. If we were to include discouraged workers in these calculations, the picture would likely be far worse.
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What we see here is that the ~3 persons per opening of today is roughly equal to the worst time after 2001.
The elephant in the room in this analysis is that all of these metrics use Total Unemployed Persons, which is an entirely inadequate measure, but it's all we've got for now. If we were to include discouraged workers in these calculations, the picture would likely be far worse.
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