The unemployment rate gets most of the attention in conversations on employment, but that’s at 5.4 percent right now, which isn’t a cause for alarm. The government keeps many other statistics on employment too. The unemployment rate is calculated by dividing the number of unemployed persons by the number of people in the labor force. That first component, the number of unemployed persons, is a statistic in its own right, and we can use it to get a different perspective on unemployment by comparing it with the number of job openings.
The Bureau of Labor Statistics has kept count of the number of job openings in the U.S. every month since 2000. It’s never been higher than it is right now. There are currently 10.1 million vacant jobs in the United States. There are 8.7 million unemployed persons. That means that if we could match up each unemployed person to an open job, we could employ all of them and have 1.4 million jobs left over.
Of course, it’s not that easy. Everyone can’t do every job, and there’s lots of mismatch between what’s available and what people can do. The Wall Street Journal reports that the biggest gap between vacancies and hiring is in the service sector, which still has not recovered from the pandemic. Of the 10.1 million open jobs, 8 million are in the service sector, yet there were only 659,000 service-sector hirings in July, so the gap will persist for quite some time.
Narrowing in to specific industries, the Journal reports that industries such as education, mining and logging, real estate, finance and insurance, and construction have already pretty much recovered to pre-pandemic job levels. The big gaps still exist in leisure and hospitality, health and social assistance, retail, and professional services.
You might think they’re just lagging behind a little, and they just need some more time to catch up. That may be true, but there was one other detail from the Journal that complicates the story. “By June 2021, economic output had returned to prepandemic levels, but employers had 6.6 million fewer jobs on payrolls,” the piece says. In other words, it now takes 6.6 million fewer workers for the U.S. economy to produce the same amount of stuff as it did before the pandemic.
That’s a huge productivity gain! Businesses were probably able to use the pandemic, intentionally or unintentionally, as a reason to eliminate slack in their operations. They also probably adopted some practices meant to be temporary pandemic measures that they will continue because they were happy with the results. Think of businesses that reduced their office space and are allowing more remote work, for example.
From the labor side of things, each worker is now more productive, which in theory should translate to higher wages. In fact, that’s exactly what we’ve seen. Companies have been paying new workers higher wages, especially in low-level service jobs.
So that’s all good news, but there’s still 10.1 million vacant jobs and 8.7 million unemployed persons.
This is a different kind of problem than the one politicians are used to talking about. Politicians love to talk about “job creation” and boast of the increase in the number of jobs on their watch.
We don’t have a “job-creation” problem right now. The jobs are out there waiting for people to fill them.
The Biden administration wants to spend a ton of money, but that’s totally non-responsive to the nature of the problem. We don’t need make-work jobs on green-energy projects. We need to better match people with the jobs that are already available.
That’s not a problem you can just throw money at and expect it to go away. As Kevin Williamson has said, those are the problems that rich countries such as the U.S. like because rich countries (by definition) have lots of money they can use to solve them. The federal government is pretty good at writing checks. It’s not very good at much else, and writing checks won’t match unemployed persons with vacant jobs.
The first thing that could help is to stop writing checks, specifically the $300-per-month federal supplement to unemployment benefits that people have been receiving since the pandemic started. Treasury Secretary Janet Yellen and Labor Secretary Marty Walsh said in an August 19 letter to Congress that the supplement would end on September 6 as scheduled and it should not be extended. The expiration of those benefits should push some workers currently on the margin into available jobs.
There’s not much else the administration wants to do that would close the gap. Even President Biden’s favorite report from Moody’s Analytics projects pretty meager employment effects from his $4 trillion “generational investment.”
The present unemployment predicament is a complicated problem that government isn’t very well-equipped to handle. But that doesn’t mean they won’t try, and it will likely result in lots of money being wasted as it’s thrown at a problem that more spending can’t solve.