There are a number of different numbers we can use to measure the jobs market in the US. Of course we can look at the number of unemployed which is some 4.8% of the workforce (the U 3 number) or possibly up at 9. something % (the U 6 number, including all those who might like to work but aren’t trying to find a job). But that’s a stock number, that’s the number of people in that state, it doesn’t tell us much about how vibrant the situation is.
To understand that vibrancy we need to understand the flow through that state of unemployment and that all gets a little more complicated. One of the numbers that helps us is the jobopenings number:
Job openings were little changed in December, but hires continued a multi-month winning streak, as economic growth powers on.
There were 5.5 million job openings on the last day of December, the Labor Department said Tuesday. That was essentially flat compared to November. But 5.3 million people were hired during the month, up from 5.2 million in November.
Of course, when we think that there were only 7 or 8 million or so unemployed and yet we’ve hired 5.3 million in the month, well, why has the unemployment rate stayed roughly where it was? Actually, it even ticked up on little notch last month. This is obviously more complex than just people get hired because they are unemployed:
The JOLTS report touches on how many opportunities are available as well as the pace of layoffs and resignations in the US labor market.
Additionally, the JOLTS report also includes the quits rate, which is one of the labor-market indicators favored by Federal Reserve Chair Janet Yellen. The quits rate dipped to 2.0% in December, after holding at 2.1% for six straight months.
So, we’ve actually a rather larger set of numbers to look at.
First there’s that stock of unemployment, the unemployment number (which itself comes in 6 variations at least according to different definitions of unemployment). Then we’ve the addition to that stock on a weekly basis, the jobless claims number. That’s the people who have been laid off and are registering for unemployment insurance for the first time. That number is running around 250,000 a week at present. We’ve also the employment number, which we use to calculate the number of people who have gained jobs. But there’s a whole other area of these numbers which is what this JOLTs report isabout:
Tuesday’s data comes from the Job Openings and Labor Turnover survey, or JOLTS, and are more detailed and provide a fuller view of the job market.
The number of available jobs has risen 4.2 percent in the past year, while total hiring in the JOLTS report has actually fallen in the past 12 months.
That suggests businesses are having trouble finding the workers they need to fill their open positions. Some companies, including many manufacturers, say that many job applicants don’t have the skills they need.
Many economists, however, argue that companies may have to pay more to attract better applicants. They also may have to do more training of prospective employees.
And that’s the last bit of it we want to know. Who has quit their jobs (not been laid off) and moved to new ones without going through unemployment? How many jobs are there out there which people are looking to fill? And then finally, with all of this information we can try to make a guess (and it will be, might well be a well informed guess but it will be guessing all the same) about what we think is going to happen to unemployment and wages.
And what all of this information is telling us is that we don’t think that the unemployment rate is going to go down all that much from where it is now. We might well be able to get that U 6 rate down a bit (some thing as much as 2 more percentage points) but that U 3 rate looks as if it’s around full employment. Yes, there are people looking for jobs, there are jobs to fill, but it takes time to match one to the other. This is what we call frictional unemployment and we really are pretty sure that 4% is the minimum we’re going to get that down to except at the very peak of a boom. But from that same information set we do think that wages are going to start rising strongly. Because if people cannot fill those skilled positions from the unemployed then they’re going to have to raise wages to tempt people from other employers. Eventually the unemployed at the bottom get jobs, yes, as people move up the skill hierarchy as they change jobs. But the interesting effect is that a tight labour market like this is what raises wages.
Putting all of this together we find we’re in a good place with the economy. No, of course it isn’t perfect. But unemployment is down about as far as we think it can go and thus wages are going to rise. Our actual policy at this point is not to do much for fear of messing this up.
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