Economy has more jobs than workers, but wages are still stagnant

The number of unemployed and the unemployment rate are often quoted in the news. A complementary statistic, which provides insight into the labor market and is seldom quoted,is the number of job openings. Each month, the Bureau of Labor Statistics, an agency of the U.S. Department of Labor, tracks employment, job openings, hires, quits, layoffs and discharges, and other separations including retirements with its Job Openings and Labor Turnover Survey (JOLTS). When compared with the number of unemployed, the number of job openings shows whether the labor market has a surplus or a shortage of labor; BLS statistics show there is currently a shortage of labor in the U.S. as job openings now outnumber unemployed job seekers.

Since March 2018, jobs openings have exceeded the number of unemployed workers who have been available to fill those jobs. March 2018 also marked the first time job openings exceeded the number of unemployed workers since the BLS began tracking job openings in December 2000 (see chart).

In their latest (Sept. 11) JOLTS news release, the BLS noted, “on the last business day of July … job openings reached a new series high of 6.9 million.” BLS also noted, “over the 12 months ending in July, hires totaled 66.7 million and separations totaled 64.2 million, yielding a net employment gain of 2.5 million. These totals include workers who may have been hired and separated more than once during the year.” In July, there were 659,000 more job openings than unemployed workers to fill those jobs.

The number of unemployed to job openings ratio is also an indicator of turning points in the economy. For example, in July 2009, when the economy began to recover from the Great Recession, the number of unemployed to job openings ratio hit a peak of 6.6; there were nearly seven workers for every job opening. Since then, that ratio has fallen to 0.9 as now there are more job openings than unemployed job seekers (see chart).

Employee and employer confidence

JOLTS data also provides valuable information related to how confident employees and employers are in the U.S. economy. When the portion of employees who quit their jobs rises, employees are expressing an increased confidence in their opportunities to acquire and retain other jobs. Similarly, when the rate at which employers layoff workers falls, employers are expressing an increased confidence in their business prospects. According to BLS economist Kimberly Riley, “quits tend to rise during an economic expansion and fall during an economic contraction. Therefore, quits can serve as a measure of workers’ willingness or ability to leave their jobs. Conversely, layoffs and discharges tend to fall during an economic expansion and rise during an economic contraction.” Currently, both employees and employers have a high level of confidence in the economy. According to the BLS, in 2017, 26 percent of workers quit their jobs, which was the second highest annual rate on record; the lowest annual quit rate was 16.1 percent in 2009 during the last year of the Great Recession.

Likewise, in 2017, employers’ layoffs and discharges were at their second lowest annual rate of 14.1 percent; the highest layoff rate was in 2009 when employers laid-off or discharged 20.2 percent of their workers. Over the last 12 months (August 2017 to July 2018), both employees and employers have expressed an increased level of confidence in the economy as the quit rate has risen to 26.9 percent, and the layoff rate has fallen to 13.9 percent.

Wages still stagnant

Given the current shortage of labor, economists would expect wages to rise as employers compete for the diminishing supply of labor and bid up wages to attract workers. That has not happened. Unfortunately for workers, real (inflation-adjusted) wageshave barely increased at all over the last year. According to the latest BLS news (Sept. 13) release of real earnings data “real average hourly earnings increased 0.2 percent from August 2017 to August 2018.” Although hourly earnings rose 2.9 percent over-the-year, nearly all that gain was eaten up by a 2.7 percent increase in inflation.