Vincent Fernando (hat tip Abnormal Returns) claims there is a v-shaped recovery after all in employment... in job openings. The reason this is not translating to job growth? People don't want those jobs:
Many Americans are choosing unemployment benefits over available jobs on offer. Earlier today we highlighted how unfilled job positions were rising at a much faster rate than new hires. We described how some Americans were forgoing job offers due to the fact that they calculated (correctly, from an individual perspective) that it was a better deal to continue receiving unemployment benefits rather than accept many jobs currently on offer.While EconomPic detailed the rise in openings last week, it is (in in my opinion) not in fact due to the unemployed being choosy (this actually seems quite ridiculous to me), but rather because corporations are taking more time to hire due to all the uncertainty.
Lets look at the details that may (or may not) back that opinion. The below chart includes the number of job openings at month-end (as was in Vincent's post) going back to 2002, but also the number of hires within each month and ratio between the two to give the job openings figure some context.
What does this chart show?
- the rate that individuals are hired per opening (i.e. the ratio) is still elevated from pre-crisis levels
- this indicates that more people are actually being hired per opening (not less) than pre-crisis
- this ratio is indeed below the ratio from last summer (i.e. hiring has slowed relative to job openings since the peak of the crisis - Vincent's point)
- the recent decline (and jump in openings relative to hires) is only a decline relative to a period when the number of hires per opening spiked 50% from pre-crisis levels (likely because employers had existing offers out and/or workers took any job they could get their hands on at that point in time)
As for the recent rise in openings relative to hiring?
It is important to note that the level of job openings is the amount at month end, not net new job openings. Thus, my best guess is that this has more to do with businesses taking their time to hire. Why rush when the economic outlook is still so uncertain / there are so many qualified candidates out there? Why not post a job opening even if there aren't plans to fill it just in case a strong candidate appears. I know if I was a small business owner (or corporation), I would want to use this opportunity to interview a slew of candidates. It is only when the market is tight that businesses need to hire quickly and the market is not exactly tight right now.
To conclude... I find the increase in job openings a positive at the margin. But, this is FAR from v-shaped...
Source: BLS
If I understand correctly, the graph compares (hires per month) to (openings on one day of month).
ReplyDeleteIf that ratio goes up, to me it suggests that openings are filled faster. Eg, if an opening created on June 2 is filled by June 20, then "one hire" is created, and "zero openings" created.
The other thing it suggests is that jobs are filled without being formally offered; that is, companies are getting applicants without advertising for positions. They can "create hires" without "creating openings."
With all due respect, I disagree with your interpretation of the metric.
"If that ratio goes up, to me it suggests that openings are filled faster. Eg, if an opening created on June 2 is filled by June 20, then "one hire" is created, and "zero openings" created."
ReplyDeleteThat is exactly what I said. The higher the ratio, the faster jobs are being filled. This ratio peaked in the crisis when openings did not need to be posted or individuals were willing to take any job immediately.
Current levels remain above trend, indicating that companies are not having a difficult time filling job. The ratio has moved down to more "normal" levels, but not all the way. My view is this is a company decision, not an unemployed person decision.