Job Openings Statistics Look Good But Needed Skills Still Trail

"If you're employed & looking for a new opportunity, it's a great time to look.  If you're unemployed, & you have skills that are current, this data bodes very well for your jobs search." – Paul McDonald, senior executive director @ staffing agency Robert Half, talking to the WSJ.

 

click on graphic to enlarge

 

Mr. McDonald was referring above to the fact that jobs openings increased in the past year by 943,000 (March to March – with 472 thousand increasing between February & March) while the number of unemployed people in the labor force decreased by 586,000 thereby bringing the number of job openings & number of unemployed people essentially into equilibrium.  See graphic above where the two lines on the right side of the graphic touch.

 

At the height of the Great Recession the ratio stood @ approximately seven unemployed people for every job opening.

 

Although unemployment figures were released for April earlier this month the latest job openings figures are for March because the job openings figures for April won't be available until June 5.

 

The unemployment rate is determined by dividing the number of unemployed people by the total number of people in the labor force – it is the percentage of the labor force that is unemployed.  The headline unemployment rate, U-3, was 4.1% in March.  Source: Bureau Of Labor Statistics (BLS)

 

The job openings rate is the number of job openings on the last business day of the month as a percent of total employment plus job openings.  It was 4.2% in March according to BLS.

 

The above relationship between unemployment & job vacancy can be shown graphically on what is known as the Beveridge curve.  This curve is hyperbolic shaped and slopes downwards as a higher rate of unemployment normally occurs with a lower rate of vacancies as indicated in the generic graph below.

 

click on generic graph to enlarge

 

The actual Beveridge curve for the series of data from December 2000 to the present is shown below – each stage follows the expansionary or recessionary hyperbolic form of the above generic graph.  Note the hyperbolic downward sloping curve from December 2000 to the end of the recession in June 2009 followed by the upward sloping hyperbolic parallel curve rising with unemployment falling & job openings rising to the March 2018 point @ the top left of the graph – a record for this series of data.

 

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The number of unemployed people in April was 6,346,000, a drop of 239,000 people, so the trick will be to keep the job openings rate steady, or preferably increasing, so that not only the unemployed find work but also the 408,000 discouraged workers, who are not in the labor force looking for work because they believe no jobs are available for them, find work too.  There are also 5-million people working part-time for economic reasons – these people prefer full-time employment but are working part-time because either their hours had been reduced or they were unable to find full-time jobs.  Another 1-million people are considered marginally attached to the labor force in April because they had not searched for work for reasons such as school attendance or family responsibilities.

 

Putting all of the above people back to consistent steady full-time employment, where they earn a paycheck from a private employer, will increase economic growth & prosperity for the country.

 

Although the above statistics look promising businesses are already experiencing headwinds in meeting their employment needs.

 

The graph below shows the increasing number of small businesses that identify the quality of labor as their biggest problem.

 

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The graphic below shows more detail of the labor quality problem.

 

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Now the people without work described above can count on employers to train them – & that is starting to happen to some degree – or they can take it upon themselves to get the proper training to become a successful job applicant.

 

The first step is for the unemployed, & really the employed also, to realize what a job really must do – what the definition of a job is: Professor Stuart Meyer defined a job as "an opportunity to create more present or future value for an employer than it costs to maintain the worker in the job.  Once the value drops below the cost, the job disappears, except as a sinecure or subsidized position."

 

Fred Charette has pointed out that "only entrepreneurs create jobs by risking career & capital to start & build businesses that employ people to make useful things & provide needed services.  By contrast, the government ... destroy(s) jobs."   But go a step farther to understand why we need unfettered free enterprise to dispel all of the misconceptions about the term "creating jobs":  Bill Burbage writes - "no entrepreneur has ever had the objective of 'creating jobs'.  (In fact) they constantly seek to eliminate jobs.  People go into business to make a profit.  If any jobs are created in the process there is no way to avoid it.  To create more jobs, the sovereign must remove as many obstacles as he can between the entrepreneur & his ability to make a profit.  No other stimulus is necessary."

 

But to understand how value producing jobs are created think of the world economy as a ladder - a metaphor presented to me several years ago now by Professor Robert Carbaugh of Central Washington University.  The U.S. is currently on the top rung & developing nations with low tech labor intensive jobs are on the bottom rungs. The other countries are in between. All countries try to climb to the next rung. This works well if the topmost countries create new industries & products, thus adding another rung to the ladder like when we replaced horse drawn carriages that used buggy whips with cars. Older industries can move overseas while new jobs are generated @ home.  It is when innovation stalls @ the highest rung that the portion of Americans near the bottom of the income distribution must compete with workers in developing countries. This is what many of the people - the unemployed & underemployed @ this late date in the recovery, the discouraged, & the marginally attached to the labor force - are facing today being  poorly educated with skills so limited that no employer can use them.  It is only through constant brainwashing that the government will take care of you that would allow someone to become so ill-prepared to support themselves that they are now competing with third world people who make pennies a day.

 

Reference post:  An Explanation Of The Deterioration Of America's Middle Class