It’s theoretically not possible to have a negative unemployment rate in society. After all, there are always some people who are in transition between jobs or waiting to start a job. And some people still manage to get fired or leave the workforce of their own free will. The question to ask at this stage of the economy is how strong the employment numbers might look if even half of all the job openings in America were filled.
Last Friday’s payrolls report was stronger than expected. The U.S. Department of Labor reported that nonfarm payrolls rose by 224,000 in June and private sector payrolls rose by 191,000 jobs in June. That said, the official unemployment rate came in with a 0.1% rise to 3.7% for the month. The pool of discouraged workers who have given up looking for a job and those who are working part-time for economic reasons who can’t find full-time work rose to 7.2% in June from 7.1% in May.
It is the second group, which makes up the unofficial unemployment rate, where the vast improvements can be made. This week, the Labor Department released its so-called JOLTS (Job Openings and Labor Turnover Survey) report, and the number of job openings was a whopping 7.323 million as of May.
While April’s JOLTS report was revised lower to 7.372 million, the job market remains quite strong. Hires in May were 5.725 million, down from 5.991 million in April, and the number of “quits” fell to 3.425 million in May from 3.516 million in April. This kept the overall quits rate at its 2.3% average for the year.
The obvious issue to consider is the spread between job openings and hires. This rose to 1.598 million in May from 1.381 million in April. While still high, that’s down from the peak over the past 12 months of about 1.8 million.
The quits rate is rather important in this picture. People who are quitting their jobs voluntarily are generally doing so to leave for higher pay, better geographic location, more fulfilling roles or other reasons. When someone quits a job to go to another job, they also just created a job opening.
Some job openings will remain unfilled for many reasons. The pay might not be enough. The job opening may be more than just geographically undesirable. It could be for a company that people do not want to work for. Maybe the job is hazardous or strenuous enough that most people aren’t going to take it regardless of the pay.
It is impossible to infer what a true unemployment rate could be. At less than 4% today, it might not even matter, but getting even close to half of those 7.323 million job openings filled would make a hefty dent in that 7.2% unofficial unemployment rate.