JOLTS and Structural Unemployment

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Written by Mark Azic   
Friday, 12 October 2012 12:15

Every month, the Bureau of Labor Statistics conducts the Job Openings and Labor Turnover Survey (JOLTS). The survey asks businesses questions about hirings, firings and layoffs, workers quitting, and the number of job openings they have. This past Wednesday, the BLS released the JOLTS for August. Using data from the JOLTS and unemployment, a ratio of the number of unemployed workers to the number of job openings, called the job seekers ratio, can give an idea of how tight the labor market is. For August, the job seekers ratio is at 3.5, meaning that for every one job opening there are three and a half unemployed workers. While this is a lot better than the high of 6.7 reached in July of 2009, it’s a far cry from the 1.7 ratio averaged from 2005 through 2007.      

Another interesting part of the JOLTS is that it’s broken down by industry. This gives insight into which industries are hiring, and which aren’t. If you’ve paid attention to very serious people – or very, very serious people – you’ve no doubt heard the argument that our unemployment problems are a mismatch between workers’ skills and the jobs of the 21st century. This argument is called “structural unemployment.” If the economy suffers from structural unemployment, government policies to boost spending won’t help. Instead, the unemployed need to get retrained for the jobs that are available. Then the unemployment crisis will disappear. Unfortunately, this story disagrees with the data/reality. 

The JOLTS is a good example of the mismatch (pun intended) between the structural unemployment argument and the actual data. If our unemployment problems were structural, you’d expect to see some sectors of the economy doing better than others – and therefore having a low job seekers ratio. In reality, we have a situation where unemployed workers outnumber job openings in all sectors of the economy. The chart below is taken from the Economic Policy Institute:

Number of unemployed far outstrip number of
available jobs across the board

(click for larger version)

unemployed-JOLTS-10-2012

While some sectors of the economy may be in a little better shape (for example compare construction with manufacturing), no sector is performing well. The argument that workers are in the wrong occupations is inconsistent with what’s actually happening.

A more coherent explanation for the unemployment crisis is that the economy is suffering from insufficient demand. All sectors of the economy have seen demand drop, and therefore we have unemployment problems across the board.

For a couple of the other ways the data doesn’t fit with structural unemployment story, check out this helpful paper by Dean Baker.

Tags: economy | jobs | recession | recovery | unemployment