The Labor Department said that in May there were 4.7 workers looking for work for each available job. Hiring rose during the month, but it due to Census workers getting temporary jobs.
The market tends to look at unemployment as a single number–9.5% or less than 10%. It is going in the right direction. The jobs problem will improve in a few months, or a year.
But, the best bellwether for the future of employment in the US may be the statistic, rarely touted as important, of the number of jobs for every person looking.The jobs-to-worker number got up to 6% or so at the depth of the recession, but is has not improved over the last few months. The BLS reacted to the latest numbers by reporting that “Even with the gains since July 2009, the number of job openings in May 2010 remained below those in place at the start of the recession.” In other words. the picture has not improved a lot.
The jobs-to-worker figure is important in another way. Jobs that are not open, to put it inelegantly, mean people can assume that the hope of finding work is small. There is already a great concern growing among economists that long-term unemployment could drag down the economy as it tries to take flight. The unemployed who have been out of work beyond the period when the government will support them cannot be consumers. Rather they are often a burden on their relatives and on the private institutions–churches, homeless shelters, and community centers–who do what they can to replace the government’s safety net. These long-suffering unemployed eventually fall into the category of those not looking.
The problem with those not working is that eventually they start looking again. As job openings increase, so will the number of job seekers. It is a vicious circle of people going in and out of the workforce competing for open jobs with jobs with too many candidates. As the number of people who want a job rises or stays steady over the next few quarters, it may overwhelm a slight recovery in hiring.
There may be 4.7 people looked for every open job. That number should fall during a recovery, but simple math shows that may not happen.
Douglas A. McIntyre