The Job Openings Paradox

One of the great oddities of the current job market is that job openings (as reported by the BLS) and help-wanted online ads (as reported by the Conference Board) have both been on the rise over the past year. These are usually signs of good labor demand.

However, actual new hires and employment growth have only edged up mildly. In other words, good labor demand has not translated into actual hires.

We can see this most clearly in the business and professional services sector (advertising, law, computer programming, etc). The chart below plots the rate of new hires against the rate of job openings in this industry.

Job openings in business and professional services (the blue line) have soared in recent months. In fact, they are back to 2007 levels. But hiring (the red line) is flat or even trending down.

This is pretty much the pattern across the whole economy. What is going on here? There are three possibilities: Mismatch, offshoring, and lags. Mismatch says that companies would like to hire, but can’t find the right people. Offshoring says that companies have openings, but they are filling them overseas. Lag would say that companies have openings, but it’s taking them time to pull the trigger, given the overall uncertainty.

I’m going to vote for a combination of offshoring and lag. I’m sure that some job openings are going overseas. But the statistics also suggest that hiring pressure is building up in some sectors of the economy. If that’s so, 2011 may be a better year for the labor market than people expect.

About Michael Mandel 127 Articles

Michael Mandel was BusinessWeek's chief economist from 1989-2009, where he helped direct the magazine's coverage of the domestic and global economies.

Since joining BusinessWeek in 1989, he has received multiple awards for his work, including being honored as one of the 100 top U.S. business journalists of the 20th century for his coverage of the New Economy. In 2006 Mandel was named "Best Economic Journalist" by the World Leadership Forum.

Mandel is the author of several books, including Rational Exuberance, The Coming Internet Depression, and The High Risk Society.

Mandel holds a Ph.D. in economics from Harvard University.

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2 Comments on The Job Openings Paradox

  1. skills mismatch?fastest growing jobs are cashiers, janitors, food service, maids, call center operators etc. those jobs gotta be alot harder than u think to have a skills mismatch

  2. i think there is one more driver that can help explain the openings paradox. many people won’t actually go back to work until they have exhausted or are nearing exhaustion of their unemp benefits. extending benefits up to and beyond 99 weeks doesn’t build motive to go back to work for some people.

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