Investigating the Paradox of the US Labor Market: Low Unemployment But Unfilled Jobs
By The US labor force has been experiencing an interesting paradox – a labor shortage in the middle of a business slowdown. In November 2022, Jerome Powell, Chair of the Federal Reserve, reported that there were approximately four million more job openings than workers.[0] As the labor market continues to improve, the number has now increased to 4.7 million.[0] This mismatch between available jobs and workers to fill them has generated ongoing discussion.[1]
The 1 percentage point decline in the labor force participation rate between 2019 and 2022 is definitely part of the story, but research shows that it is not the whole story.[2] In fact, more than half of the decline in aggregate hours worked in the US between 2019-2022 occurred through a reduction in hours worked per person.[2]
The unemployment rate of 3.4% is extremely positive news, as it is the lowest rate since 1953. Despite the fact that there are currently 5 million unfilled positions, an unusual economic pattern exists; even if every job seeker were to be employed, these openings would still remain.[3]
At the moment, the rate of unemployment is quite low, standing at about 3.5%. Taking into consideration the low unemployment rate, the labor market is much more constricted than one would anticipate.[2] The “vacancy rate” is calculated by taking the total number of job openings in the economy and dividing it by the total number of jobs.[2] Typically, when the unemployment rate is at 3.5%, the vacancy rate is around 4.5% to 5%.[2] In contrast, the vacancy rate was 7% the previous year[2] This is exceedingly high – almost unprecedented.[2]
Those proposing that immigration would reduce wages and control inflation are completely disconnected from the actual US labor market.[4] It is a fact that not having work authorization is not a major issue when it comes to getting a job, as the law prohibiting the hiring of undocumented immigrants has been neglected for many years.[4]
The current labor shortage in the US is an interesting paradox, and one that requires further exploration. It is clear that the current economic slowdown is not simply a matter of lack of workers, but rather a complex mix of reduced hours worked per person, reduced labor force participation, and continued job openings. The only way to accurately assess the situation is to continue researching and analyzing the data to gain a better understanding of the current labor market.
0. “Are labor supply and labor demand out of balance? | FRED Blog” Federal Reserve Bank of St. Louis, 9 Feb. 2023, https://fredblog.stlouisfed.org/2023/02/are-labor-supply-and-labor-demand-out-of-balance/
1. “Are labor supply and labor demand out of balance?” Forex Factory, 9 Feb. 2023, https://www.forexfactory.com/news/1204853-are-labor-supply-and-labor-demand-out-of
2. “Where are the workers? WashU research exposes ‘quiet quitting' impact on labor shortage – The Source – Washington …” Washington University in St. Louis, 6 Feb. 2023, https://source.wustl.edu/2023/02/where-are-the-workers-washu-research-exposes-quiet-quitting-impact-on-labor-shortage
3. “Other Views: Smart legislation can help ease WA labor shortage” Walla Walla Union-Bulletin, 9 Feb. 2023, https://www.union-bulletin.com/opinion/editorials/other-views-smart-legislation-can-help-ease-wa-labor-shortage/article_2dd620ba-a7d5-11ed-b123-d34e6b204b57.html
4. “No, more immigration won't stem inflation” New York Post , 3 Feb. 2023, https://nypost.com/2023/02/02/no-more-immigration-wont-stem-inflation
