The chart above shows that job openings have been increasing nicely since the recession ended, according to two different measures, one from the BLS (job openings) and another from the Conference Board (online advertised vacancies). In contrast, the unemployment rate has barely moved from its peak a year ago of 10.1%. What's going on here?
Mike Mandel offers three possible explanations for why the jobless rate hasn't improved much, despite the significant, ongoing improvements in job openings: Mismatch, offshoring, and lags.
1. Mismatch says that companies would like to hire, but can’t find the right people.
2. Offshoring says that companies have openings, but they are filling them overseas.
3. Lag would say that companies have openings, but it’s taking them time to pull the trigger, given the overall uncertainty.
I’m going to vote for a combination of offshoring and lag. I’m sure that some job openings are going overseas. But the statistics also suggest that hiring pressure is building up in some sectors of the economy. If that’s so, 2011 may be a better year for the labor market than people expect."
MP: After looking at jobless rates by educational attainment, I would offer some support for the mismatch explanation for the following reason: the jobless rates for the highest and least educated workers have continued to rise and reached all-time highs in November.
1. The jobless rate for workers with less than a high school degree was 15.7% in November, the highest in BLS history back to 1992 for this data series.
2. The jobless rate for workers with a bachelor's degree or higher reached an all-time record high of 5.1% in November.
On the other hand, the jobless rate for workers with a high school degree has fallen by almost one percentage point from its 10.9% peak to 10% in November, and the rate for those with an associate's degree has fallen almost a half percentage point from its peak of 9.1% to 8.7%. This might suggest some mismatch in the labor market between the education requirements of job openings and the educational attainment of job candidates?
Further, there are sectors like construction that still has a stubbornly high jobless rate of 18.8% and leisure and hospitality that has a jobless rate of 12.4%, and there are probably very few of those jobs that are being offshored. In contrast, the jobless rate in the manufacturing sector, maybe the sector most likely to have jobs outsourced, has come down to 9.9% in November, just slightly higher than the 9.3% rate overall (not seasonally adjusted).
In any case, I do agree with Mike that there are many indications that 2011 might be a better year for the U.S. labor market than many people are probably expecting.
Update 1: Thanks to Morganovich for pointing out in the comments section a fourth explanation - the troubles in the housing market make workers less mobile than in past post-recession periods, which would be a variation of the mismatch explanation. And yes, it would be interesting to see a geographical overlay of job openings and unemployment rates.
Update 2: Thanks to Westywildcat and Scott Lincicome for another explanation, or variation of the mismatch theory: The historically unprecedented 99 weeks of government unemployment insurance benefits, which would create disincentives to work even though job openings are available and increasing.