U.S. employers have more job openings than at any other time in nearly five years. That's in part because they seem in no hurry to fill them.
U.S. employers have more job openings than at any other time in nearly five years. That’s in part because they seem in no hurry to fill them.
And it helps explain why the job market remains tight and unemployment high. Even as openings have surged 11 percent in the past year, the number of people hired each month has declined.
Why so many openings yet so few hires?
Economists point to several factors: Some unemployed workers lack the skills employers want. Some companies may not be offering enough pay. And staffing firms and employment experts say that in a still-fragile economy, many businesses seem hesitant to commit to new hires. They appear to be holding out for the perfect candidate.
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“We’re living in a fear-based environment right now,” says Kim First, CEO of The Agency Worldwide, a recruiting firm for pharmaceutical and biotech companies.
Those who do have jobs these days are unlikely to lose them. Layoffs have sunk to a pre-recession level.
But First says that companies feel they can’t afford to take a risk by hiring someone who doesn’t appear to be an ideal fit for the job they’ve advertised.
“They are really reluctant to make that leap of faith,” she says. Companies “need someone to come in and hit the ground running.”
The Labor Department said Tuesday that the number of job openings rose 8.7 percent in February from January to a seasonally adjusted 3.93 million. That was the most since May 2008.
At the same time, companies hired a seasonally adjusted 4.4 million people, just 2.8 percent more than in January. And hiring remained lower than it was a year ago, when it was nearly 4.5 million.
The figures suggest that the Great Recession may have transformed the job market in ways that economists still don’t fully understand. Normally, more openings lead, over time, to stronger hiring and steadily lower unemployment.
Yet in May 2008, when job openings were as numerous as they are now, the unemployment rate was 5.4 percent. Now, it’s 7.6 percent.
And in 2007, before the recession began, employers were hiring an average of 5.2 million people a month – 15 percent more than in February this year.
The Labor Department’s Job Openings and Labor Turnover survey, or JOLTS, reveals the total number of people hired and laid off each month. It differs from the department’s jobs report, which provides each month’s net job gain or loss. But by quantifying total hiring and layoffs, the JOLTS can paint a fuller picture of what employers are doing.
From November through February, employers added a net average of about 220,000 jobs a month. The JOLTS report shows that a big reason for those gains was that layoffs fell. Companies cut 1.5 million jobs in January – the fewest since the JOLTS data was first compiled in December 2000.
The number of people quitting is still low compared with pre-recession levels, though it’s risen in recent months. A low number of people quitting reduces opportunities for those out of work. About 2.3 million people quit in February, 7 percent higher than a year ago but below the average of nearly 2.9 million that were quitting each month when the recession began in December 2007.
Jason Faberman, an economist at the Federal Reserve Bank of Chicago, likens the job market to a game of musical chairs: If no one gets up, there isn’t any room for anyone else to sit.
In March, U.S. employers added a net 88,000 jobs, the fewest in nine months and less than half the pace of the previous six months. At the same time, the increase in openings suggests that net job gains may strengthen in coming months.
Federal Reserve Chairman Ben Bernanke has said that total hiring, as gauged by the JOLTS report, is something he and other Fed officials track in assessing the job market. The Fed has said it plans to keep short-term interest rates at record lows at least until unemployment falls to 6.5 percent.
Steven Davis, an economics professor at the University of Chicago, says his research shows that companies aren’t filling jobs as fast as they did in the past. Jobs now remain unfilled for an average of 25 days. That’s up from about 16 days in mid-2003, when the job market was recovering from the previous recession.
Davis cites several reasons for the change. Companies may be uncertain about the outlook for the economy. And if the outlook worsens after a company posts a job opening, they may not fill it.
With unemployment high, the cost of missing a good hire doesn’t seem as high, Davis says. Managers may figure they can always find someone just as qualified later.
And a bigger proportion of job openings in the United States is in health and education. Those jobs take longer to fill, partly because of higher skill and education requirements. Lower-skilled jobs in areas such as construction, which are typically filled more quickly, have declined.
Some economists also say that there may be a mismatch between the skills the unemployed have and what employers are seeking. Some manufacturers, for example, have reported difficulty in finding higher-skilled machinists, according to the Fed’s Beige Book, which provides anecdotal information on economic conditions across the country.
“It’s a different labor market than we’ve had in the past,” says Cooper Howes, an economist at Barclays. “We have to readjust our expectations of what a healthy labor market looks like.”
All of which could make it harder to reduce unemployment. Howes says a “normal” level of U.S. unemployment may now be around 7 percent, rather than 5 percent to 6 percent.
Other economists doubt that a skills mismatch is playing a significant role. Elise Gould, an economist at the liberal Economic Policy Institute, says there are more unemployed people than jobs in nearly every industry. That suggests that a broad slowdown in the economy is to blame for still-high unemployment, rather than a shortage of qualified workers in certain industries.
Some companies may also have slowed hiring after steep government spending cuts began taking effect March 1. Those cuts are expected to shave about a half-point from economic growth this year.
Peter Cappelli, a management professor at the University of Pennsylvania’s Wharton School of Business, says that until employers fill a job opening, they feel they’re “saving a ton of money by leaving the position open.”
That dynamic won’t change, Cappelli says, until the economy grows fast enough that people feel comfortable about quitting to find jobs elsewhere.
AP Economics Writer Paul Wiseman contributed to this report.
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