Having many jobs available is good in many ways, it becomes a problem when the labor shortage begins to constrain growth in some areas and some industries.
There are more job openings in the United States than there have ever been before: more than 7 million of them.
The U.S. Bureau of Labor Statistics has been tracking job openings since December 2000, and the number has never been as high as it was at the end of August (the most recent reading) at more than 7.1 million.
As of September, there were only about 6 million unemployed people across the nation. Thus, even if every single unemployed person were to fill an open job (which is obviously impossible due to mismatched skills and geographies, among other things), we would still need a million more workers.
The U.S. also has the lowest jobless rate since the 1960s, and the fewest people filing initial claims for unemployment in 50 years.
Firms of all sizes are looking to hire.
Companies with more than 500 employees typically account for more than half of open jobs (nearly 53 percent as of the end of 2017, the most recent data by firm size). Almost 22 percent of open positions were within entities with fewer than 50 employees, with the remaining 26 percent at mid-sized firms.
Not so long ago, we had the opposite problem.
In the depths of the Great Recession in July 2009, there were fewer than 2.2 million job openings, and through much of that time there were six or seven unemployed people per opening.
For the past year and a half, the number of unemployed persons has been barely higher than the number of job openings, and, earlier this year, openings surpassed unemployed workers.
While having a lot of available jobs is a good thing in many ways, such as allowing employees to make moves to more desirable jobs and finally alleviating some of the wage stagnation that has been a lingering problem for many, it’s also a problem.
In some areas and industries, labor shortages are beginning to constrain growth, with no relief in sight.
At some point, it is likely that the economy will slow, and we will see job openings trend downward to more normal levels.
Nonetheless, long-term demographic trends, such as the aging of the U.S. population and the retirement of the large Baby Boomer generation point to the potential for more frequent and intense labor shortages in the future during periods of economic expansion.
The market will incentivize technological advances that will help resolve future shortages, and part of the answer will be automation, machine learning and other actions to increase the productivity of existing workers.
More rational immigration policy will also be needed to permit use of workers from other countries in a more efficient manner.
It’s not politics.
It’s just math.
M. Ray Perryman, Ph.D., is president and chief executive officer of The Perryman Group (perrymangroup.com). He also serves as Institute Distinguished Professor of Economic Theory and Method at the International Institute for Advanced Studies.