The jobs market is getting better!

by pdxblake

I got the inspiration for this post from a similar chart from Jared Bernstein at the CBPP (which was down when I wrote this post, either for upgrades or because of a zombie attack, take your pick).  He was using the graph below (specifically the green line, which is the ratio of the job openings to the number of people unemployed, and uses the right-hand scale), which shows a spike during the financial crisis and a steady decline ever since.

The decline has been due to both a decline in the number of unemployed people (people finding jobs and also those who give up searching for work) but also a rise in the number of the job openings (both are collected by the Bureau of Labor Statistics).  However, it has been significant, falling from nearly 7 people unemployed for every job opening in mid-2009 to under 4 now.  There are two things going on here: job openings are increasing and unemployment is falling.

I tried to separate out the effects of the two trends with another graph that I made of:

1. The ratio of unemployed people to job openings (holding the level of job openings constant at the level when the ratio peaked)
2. The ratio of unemployed people to job openings (holding the number of unemployed peoples constant at the level when the ratio peaked)

Here’s what it shows:

The blue line is the ‘unemployment effect’.  It shows how much the rise and fall in unemployment contributed to the change in the number of unemployed people for each job opening.  The red line shows the opposite (how much the rise in the number of job openings contributed to the fall in the number of people who were unemployed for each job opening).  Clearly, the rise in the number of job openings had a bigger impact on the fall in the number of people who were unemployed for each job opening.*

What this means for the economy is that although there is a lot of concern about the people who are giving up looking for work, the healing of the labor market is coming much more from increased job openings (an indicator of hiring).  Now, it is still not back to pre-recession levels and has taken an awful long time getting there, but the ending of recessions caused by financial crashes combined with real estate bubbles popping take a long time.  And, this has happened with the backdrop of a too small stimulus in 2009 and very little since (both a result of an intransigent Republican Party determined to let nothing stand in their way of defeating Obama, except their incompetence in picking a candidate who can win).

The recovery of the economy is good for Obama’s re-election hopes and for the people who are unemployed.  This is one measure of the improvement.

* Correlation does not indicate causation