Laboring to Find Workers
- Keywords:
- talent
The Job Openings and Labor Turnover Survey (JOLTS) showed a record-high 9.2 million U.S. job vacancies in May, only slightly higher than April’s reading, suggesting that unfilled positions are starting to stabilize after surging to start the year. Indeed, the NFIB’s survey showed the share of small businesses with job openings at 46% in June, down from 48% in May, but still representing the two highest readings on record. (The NFIB’s poll commenced in 1973, much earlier than the JOLTS’ start in 2000.) After payrolls expanded by 1.4 million in the past two months alone, the fact that these metrics are only starting to stabilize, and around record highs, is a testament to the underlying strength of labor demand and the sluggishness of the supply response.
Finding employees has become problematic despite what seems to be a more than adequate number of available workers. In June, there were 9.5 million persons officially classified as unemployed, meaning they were actively (albeit not necessarily aggressively) looking for a job. According to ZipRecruiter, most states have now reinstated their work search requirements to be eligible to receive unemployment insurance (UI) benefits, after relaxing them because of the pandemic. Nevertheless, the NFIB survey showed that 56% of firms had few or no qualified applicants for their job openings, barely down from 57% in May and matching the two highest readings on record (since 1993). There’s obviously more than just a skills mismatch problem at play here.
Meanwhile, the labor force participation rate was 61.6% in June, having been stuck in the 61.4%-to-61.7% range for the past year. It was 63.3% immediately before the pandemic. Indeed, there are currently 3.8 million fewer persons in the labor force compared to February 2020 (not seasonally adjusted), with 1.6 million saying they are not engaged in the labor market specifically because of the pandemic. Among the 3.8 million, 1.9 million (50%) currently want a job, but they haven’t searched for one in the past four weeks (so they aren’t counted as unemployed or in the labor force).
The remainder reflects individuals, for example, who have retired or opted to become a stay-at-home parent. Among the 1.6 million specifically citing the pandemic, 638,000 (40%) currently want a job.
There are lots of individuals wanting to work, but not actively searching for a job; or looking for one, but not urgently. A recent survey by Indeed showed that more than 70% of job seekers were not actively looking (they were searching only passively or not at all), with 10% looking both actively and urgently, and slightly more than 10% searching actively but not urgently. The reasons respondents gave for not being urgent in their job search were
- COVID-19 health and safety concerns (~25%)
- Having a spouse employed (>20%)
- Having a financial cushion (~20%)
- Having care responsibilities (<20%)
- Enhanced UI benefits (~10%)
The two lowest-ranked reasons appear at odds with what the media (and some politicians) are saying in terms of them being among the top three factors for reduced labor market engagement, along with COVID concerns. However, this was an online survey (easier to be untruthful?) and Indeed’s clientele could be causing a sample selection bias. Jobs requiring low skills and paying minimum wages, along with those individuals searching for them, might not be that prevalent on Indeed’s platform.
In any event, the anecdotal evidence suggests that enhanced UI benefits dampen labor market engagement for potential minimum-wage and other lower-wage earners. This compelled 25 states to announce plans to exit the federal programs earlier than their September expiries. Looking at the latest UI claims figures, it’s too early to determine whether states halting the federal programs are broadly seeing a relatively larger fall in beneficiaries than the non-halting states, although the very preliminary evidence is pointing in that direction.
As the summer unfolds, several factors are likely to prod a more active job search, and a better supply response to the strong demand for labor. Increased vaccination rates, the start of the school year, the end of UI benefits and savings running out were all critical factors cited in the Indeed survey. However, the most important factor mentioned was more job opportunities, which we take to mean higher wages, given job openings are already running at record highs. Although lower-wage jobs have been dominating recent payroll employment gains, average hourly earnings growth has picked up. In June, it was 3.6% y/y or a 5.9% annualized rate over the latest three months alone. However, the Atlanta Fed’s Wage Growth Tracker came in at 3.4% y/y for June (3-month average, weighted), still well within its recent 3.3%-to-3.7% range. We suspect the evidence of wage acceleration is also going to become more compelling as the summer unfolds… along with the next few seasons.
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Michael Gregory, CFA
Deputy Chief Economist & Managing Director
Michael is part of the team responsible for forecasting and analyzing the North American economy and financial markets. He has spent his career working in either ec…(..)
View Full Profile >The Job Openings and Labor Turnover Survey (JOLTS) showed a record-high 9.2 million U.S. job vacancies in May, only slightly higher than April’s reading, suggesting that unfilled positions are starting to stabilize after surging to start the year. Indeed, the NFIB’s survey showed the share of small businesses with job openings at 46% in June, down from 48% in May, but still representing the two highest readings on record. (The NFIB’s poll commenced in 1973, much earlier than the JOLTS’ start in 2000.) After payrolls expanded by 1.4 million in the past two months alone, the fact that these metrics are only starting to stabilize, and around record highs, is a testament to the underlying strength of labor demand and the sluggishness of the supply response.
Finding employees has become problematic despite what seems to be a more than adequate number of available workers. In June, there were 9.5 million persons officially classified as unemployed, meaning they were actively (albeit not necessarily aggressively) looking for a job. According to ZipRecruiter, most states have now reinstated their work search requirements to be eligible to receive unemployment insurance (UI) benefits, after relaxing them because of the pandemic. Nevertheless, the NFIB survey showed that 56% of firms had few or no qualified applicants for their job openings, barely down from 57% in May and matching the two highest readings on record (since 1993). There’s obviously more than just a skills mismatch problem at play here.
Meanwhile, the labor force participation rate was 61.6% in June, having been stuck in the 61.4%-to-61.7% range for the past year. It was 63.3% immediately before the pandemic. Indeed, there are currently 3.8 million fewer persons in the labor force compared to February 2020 (not seasonally adjusted), with 1.6 million saying they are not engaged in the labor market specifically because of the pandemic. Among the 3.8 million, 1.9 million (50%) currently want a job, but they haven’t searched for one in the past four weeks (so they aren’t counted as unemployed or in the labor force).
The remainder reflects individuals, for example, who have retired or opted to become a stay-at-home parent. Among the 1.6 million specifically citing the pandemic, 638,000 (40%) currently want a job.
There are lots of individuals wanting to work, but not actively searching for a job; or looking for one, but not urgently. A recent survey by Indeed showed that more than 70% of job seekers were not actively looking (they were searching only passively or not at all), with 10% looking both actively and urgently, and slightly more than 10% searching actively but not urgently. The reasons respondents gave for not being urgent in their job search were
- COVID-19 health and safety concerns (~25%)
- Having a spouse employed (>20%)
- Having a financial cushion (~20%)
- Having care responsibilities (<20%)
- Enhanced UI benefits (~10%)
The two lowest-ranked reasons appear at odds with what the media (and some politicians) are saying in terms of them being among the top three factors for reduced labor market engagement, along with COVID concerns. However, this was an online survey (easier to be untruthful?) and Indeed’s clientele could be causing a sample selection bias. Jobs requiring low skills and paying minimum wages, along with those individuals searching for them, might not be that prevalent on Indeed’s platform.
In any event, the anecdotal evidence suggests that enhanced UI benefits dampen labor market engagement for potential minimum-wage and other lower-wage earners. This compelled 25 states to announce plans to exit the federal programs earlier than their September expiries. Looking at the latest UI claims figures, it’s too early to determine whether states halting the federal programs are broadly seeing a relatively larger fall in beneficiaries than the non-halting states, although the very preliminary evidence is pointing in that direction.
As the summer unfolds, several factors are likely to prod a more active job search, and a better supply response to the strong demand for labor. Increased vaccination rates, the start of the school year, the end of UI benefits and savings running out were all critical factors cited in the Indeed survey. However, the most important factor mentioned was more job opportunities, which we take to mean higher wages, given job openings are already running at record highs. Although lower-wage jobs have been dominating recent payroll employment gains, average hourly earnings growth has picked up. In June, it was 3.6% y/y or a 5.9% annualized rate over the latest three months alone. However, the Atlanta Fed’s Wage Growth Tracker came in at 3.4% y/y for June (3-month average, weighted), still well within its recent 3.3%-to-3.7% range. We suspect the evidence of wage acceleration is also going to become more compelling as the summer unfolds… along with the next few seasons.
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