February 11, 2020
.The Labor Department reported that job openings fell 5.4% in December to 6,423 thousand after having declined 7.8% in November. The biggest drop in job openings was in the transportation category so one wonders whether the G.M. strike and the problems at Boeing are negatively impacting the date for those two months. Despite the drop in those two months job openings remain at a very elevated level. Indeed, there are far more job openings today than there were prior to the recession (4,123 thousand in December 2007). There were 5.8 million people unemployed in December.
As shown in the chart below, there are currently 0.9 unemployed workers for every available job. Think of that — there are more job openings today than there are unemployed workers. Prior to the recession this ratio stood at 1.7,
In this same report the Labor Department indicated that the quit rate in December was 2.3 which is essentially the highest level since April 2001. This is a measure of the number of people that voluntarily quit their jobs in that month. During the height of the recession very few people were voluntarily quitting because jobs were scarce. So the more this series rises, the more comfortable workers are in leaving their current job to seek another one. The quit rate today is 2.3. At the beginning of the recession it was at 2.0 and the record high level for this series was 2.6 back in January 2001.
There is one other point that should be made about this report. Several years ago Janet Yellen used to claim that there were a large number of unemployed workers just waiting for jobs if only the economy were to grow fast enough. She is assuming that these people have the skills and are qualified for employment. But they aren’t.. There are plenty of job openings out there. What is not happening as quickly is hiring. Take a look at the chart below. Job openings (the green line) have been rising rapidly (and are far higher now than they were prior to the recession); hires (the red line) have been rising less rapidly.
Indeed, if one looks at the ratio of openings to hires the reality is that prior to the declines in November and December this ratio has been close to its highest level since this series began in 2000. There are plenty of jobs out there, but employers are having a hard time filling them. Why is that?
A couple of thoughts come to mind. First and foremost, many unemployed workers simply do not have the skills required for the jobs available. If they did, why aren’t they being hired? Why aren’t some current part time workers stepping into the void for those full time positions? Why haven’t discouraged workers begun to seek employment with so many jobs available? Why haven’t long-term unemployed workers bothered to go back to school and acquire the skills that are necessary to land a job?
Or perhaps many of these people flunk the drug tests. They might not be qualified for employment for a variety of possible reasons.
Perhaps also some people in this group find the combination of unemployment benefits and/or welfare benefits sufficiently attractive that there is little incentive to take a full time job when you can sit at home do nothing and make almost as much.
Jobs remain plentiful and the only reason the unemployment rate is not falling faster is because the remaining unemployed/discouraged/part time workers do not have the skills required by employers today, flunk the drug tests, or are unwilling to take the jobs that are available.
Stephen Slifer
NumberNomics
Charleston, SC
Steve, with my background in community and technical colleges I agree wholeheartedly with your comment that workers do not have the skills required by employers today. That is were the education system has to come to grips with the situation. We do our best, but sometimes that is not enough to keep up with the ever-changing demand.
Darrel Staat
Hi Darrel,
You are just the guy I need to talk to. I am really impressed with what Mary Thornley and TT are doing here in the Charleston area re: working with local businesses (like Boeing) and coming up with programs designed to fit the specific needs of the firm. I am also finding that more and more firms are willing to offer some sort of apprenticeship program for younger workers and/or tuition reimbursement if they agreed to stay with the firm for x number of years.
Went to a TED conference here in Charleston back in April. Had a lot of tech type people who have started their own firms. Not a single one of them developed their tech skills from school. They seemed to learn it from their peers. One guy was only going to the College of Charleston as a favor to his parents and grandparents who put up the money for him to start his own firms. In some sense he was taking a time out from his job to go to college. Makes me wonder if our entire economic model is off on the wrong track.
Thoughts?
Steve
Among many other concepts, this touches on the difference between our more passive, curriculum-based “education” system which provides or pushes knowledge and the more active curiosity-based “learning” which is pulled by individuals at their discretion. It’s why higher education is being carefully scrutinized and good tech schools are increasing in popularity. Which one is more closely aligned with the jobs available? I think we have some very interesting years in education ahead of us.
Hi Jim,
The honest answer to your question re: which type of education is more closely aligned with the jobs available today is — I don’t know. Sounds like something that you all at USC may be in a better position to answer. But I would venture a guess that the technical college system today is geared more towards satisfying the needs of employers. I have been impressed by the extent to which, for example, Mary Thornley at Trident Tech here in the Charleston area works with all sorts of employers to tailor programs to satisfy their needs. When a student graduates from TT, and sometimes long before they graduate, they have a job. That is not always the case with students graduating from your curriculum based four year colleges and universities. I try to look back at my undergraduate days and wonder about the usefulness of many of those required courses. Sounds like a discussion we should continue at some point! Thanks for sharing your thoughts.
Steve
Steve, I think the reason that so many job openings are not being filled has to do mostly with the fact that the skill level of applicants are not meeting the needs of industry. The business community is now extremely global and have to compete on the international level. When higher education not turn out enough workers with the skills needed to meet the needs, we are failing the workforce, the business community and the country in general. We know things change in the business world at a ferocious rate of speed and higher education is stuck in old ways or thinking and acting which are very gradual and just plain slow. How to get higher ed moving at the speed needed is a good question that at present we do not have the answer to. Where is the next John F. Kennedy when you need him? We got to the moon in less than 10 years. Encouraging higher ed to get a move-on is possible, but will take some dynamic leadership in WDC and the in states. Thanks again for your insight. I really appreciate it. …Darrel Staat
Stephen, as you probably know, the jobs of the 21st century are beginning to be significantly different from those of the 20th. That change, dominated by technology, will continue, most like with increasing speed into this century. I think that explains the situation with openings and hires. Education and training continue to be of utmost importance to the future of jobs in our economy. I know I am prejudiced in that regard, but the facts are beginning to point in that direction.
Darrel Staat
Enjoying your reports. Regarding this one, one factor you did not mention which I know comes into play is what I call the “Background Check” factor. Many applicants do not get hired because of negative information contained in their background reports, including drug test results. I don’t know if there is any way to measure this, but from employers I have personally talked to about the difficulty of finding “good help”, this gets get mentioned more than anything else, including skill sets.
Hi Dennis,
Thanks for your response. I have no idea to what extent an applicant’s failure of drug tests is the reason behind their not getting hired, but I would agree that it is probably fairly common. There is certainly another group of individuals who are content with the welfare/unemployment benefits they are receiving that they choose not to work. My point is that many of the unemployed/underemployed individuals are not qualified for the positions they seek — whether that is lack of skills, or drugs, or simply an unwillingness to accept the position offered. The jobs seem to be available, but for a variety of reasons they are not getting filled.
Steve
Your comment seems to have gotten cut off. You are right that not every unemployed worker is qualified for the position. Many do not have the skill set required. Many flunk the drug test. The solution in my mind is through education and not necessary a 4-year degree. In many cases a tech school will work just fine and we seem to be gradually moving in that direction. Also, getting that required education takes time and money. That is why I am so supportive of apprenticeship programs and companies paying for a worker’s education if they agree to stay for x number of years after graduation.
At the turn of the century i noticed an increased negative attitude by employers toward new and replacing employee. Seems it has only increased. This is one reason GP margins have continued to rise.
Hi Walter,
Thanks for your comment. Not sure I understand why employers would have a negative attitude toward new employees and replacing employees. Are they using technology to reduce the need for some of these workers? Believe they have a lousy work ethic? Maybe the new hire’s skill set just does not match up with their needs. Why do you think that is the case.
Steve
I’ll bet that CNN and MSNBC will NEVER quote this!