More Proof That Something’s Different

There are more job openings than new hires. This indicates employers have problems finding qualified applicants, which is important for a couple of reasons.

I recently argued that something is different in this economy. Now, Department of Labor data confirms this position.

The job market is defying the laws of supply and demand. These laws are the basis of all economic theory. They are always true … in theory.

For example, when there is more demand than supply, prices rise. In the job market, if there are more jobs than potential workers, we expect wages to rise. But something’s different right now…

The chart below shows we have more job openings than companies can fill, yet wages remain low.

There are more job openings than new hires. This indicates employers have problems finding qualified applicants, which is important for a couple of reasons.

Years ago, there were more applicants for jobs than there were jobs. Companies often hired without even advertising jobs. Word of mouth that a company was hiring could attract candidates. Current employees also referred friends and family to positions before they were advertised. In February 2015, that changed. This is where the lines cross in the chart.

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Now there are more job openings than new hires. This indicates employers have problems finding qualified applicants, which is important for a couple of reasons.

First, when jobs go unfilled, economic growth slows. That’s been a problem since 2009. Until qualified employees are available, economic growth will remain at disappointing levels.

Second, employers should boost wages to attract qualified employees. That’s not happening. This is a breakdown in economy theory.

Because openings are advertised, we know employers realize they need people. If qualified applicants existed for the openings, employers would raise wages to persuade them to take jobs. Instead, employers are allowing jobs to go unfilled. Employers understand they can’t find people at any price, so they are rationally avoiding increasing their own costs.

This is a problem, and the Federal Reserve seems to be struggling with it. Fed decision-makers are smart, and they know interest rate increases won’t increase wages. But, as the old saying goes, when all you have is a hammer, everything looks like a nail. All the Fed can do is raise rates because that’s the tool it has available. It’s waiting for its staff to write papers explaining how the economy has changed. Until it knows what’s changed, the Fed is powerless to fix anything.

Regards,

Michael Carr, CMT
Editor, Peak Velocity Trader

  • Foreign Devil

    I’m curious to know what sort of positions can not be filled.

  • jringo55

    This is more likely because employers are offering low wages. Trust me, people will come out in droves to work if the wages are better than slave wages. My wife is skilled and experienced in her field. Her wage is stuck at 18 an hour. Where I live, the starting wage is 8-10 an hour. I wouldn’t roll over in bed for such wages. America loves slaves. The slaves are better off staying home. There is no reason to strive to get ahead if the cards are stacked against you getting there. People want to work but they want to work for a gain. Raise the wages. People who make more money are tax payers and thriving consumers. People who make just enough to get by are neither of these.

  • Tony Muhammad

    Also, available jobs numbers are not accurate month to month. Today’s job markets have too many online job recruiters and employment agencies between job seekers and employers with supposed open positions. The days when local employers advertised job openings directly in their local newspapers is almost gone. I believe in part it’s a massive hoax reporting unfilled jobs or not enough qualified workers.

    Think about it…How can a company experience growth or stay in business if it don’t have the workers to produce products and services? I believe the Fed knows exactly what is happening in the American workforce.

    There are plenty of workers able and body but there are not enough available job openings to hire every able bodied man and woman in America seeking work. See for yourself – Post your own resume with any of the too many online job agencies that list hundreds of openings in your local area never mind the list of job openings in other states that amount to the supposed hundreds of thousands of job openings month to month that go unfilled.

    Your resume will sit in virtual reality until a company H.R. person or an agency recruiter views it or a resume builder offers to rewrite your resume at a cost of course. In spite of you meeting or surpassing a company job qualifications for the opening your resumes will go unnoticed day after day during your job search or it will be chosen along with 25-50 other applicants in an ‘elimination’ process to narrow it down to one applicant for the one opening – too many unemployed seeking work.

    Why? Two obvious reasons – The opening did not exist in the first place or the company has an over abundance of applicants – like you to choose from. I believe the latter reason provides a greater explanation to the health of America’s overall depressed job market – It’s a massive hoax to not explain automation and robotics are replacing people in the work force.

    All that remains are limited jobs openings paying 8 to 12 dollars an hour in a workers economy demanding livable wages of 15 dollars in higher to live comfortable – not one of the tens of million poverty worker in our society.

  • Garry Moore

    In my area there are several large factories manufacturing auto parts. They find it very difficult to to obtain personnel who can pass the drug screening.

  • jringo55

    What do you expect? We have generations of free spirited drug users that came back from military duty all the way back in our history. Drug use is part of America’s culture. I don’t agree with it but if your daddy did it — hard to tell your kids not to do it. Plus America is fast filling up with prescription drug users as well. Born out of F&D. As for mfg plants. There is one near me as well. You are correct. Lots of people fail the drug test or don’t apply because they know they can’t pass it. The jobs are lower pay now and they are not the best jobs unless, you crave standing in one place for hours and begging like a child to go to the bathroom. Working in mfg is not a desired job. People who claim it’s a cake walk need to try it at these wages. Some people don’t make it past the 1st day. And more quit by the 3rd day. I did for 30 years. I hated most of it but the pay and the retirement package was worth the anguish. Now the pay is not worth it and there is no more traditional retirement. Mfg is a lousy place to work.

  • jringo55

    The recovery for Main Street is a hoax. Main Street never left the recession of 2008. The so called recovery went to Wall Street, CEO’s, Big Banks and the 1% er’s. Trust me, the people on Main Street will spend if they have disposable money. Main Street is the engine of a thriving economy. The confidence on Main Street was shattered in 2008 and because the wages are still in the toilet, Main Street’s engine just sputters. My neighbor complained that his daughter was a manager at Kroger’s and they were begging people for help. He said, she can’t get people to apply. I looked him straight in the face and said, people are always for sale at the right price. She can’t get good help and keep it because she is not willing to pay for it. You want disposable help, pay low wages. You want better help pay better wages. It’s not rocket science.

  • jringo55

    It’s obvious they are low pay. There are plenty of these low pay jobs all around where I live. No one wants to work as a paid slave. That’s why the jobs go unfilled.

  • Michael Carr

    Several comments address the quality of unfilled jobs and I believe they run the gamut from bad jobs to good. I live in Colorado where hiring is a problem for many. Workers won’t take or won’t pass drug tests. This is a choice but some companies want drug-free workplaces for safety. Other companies complain they can’t find employees with sufficient math skills. Math is helpful in retail jobs, construction related jobs and many other fields. Yet, not everyone can meet the minimum requirements. Raising pay is one possible solution but that won’t solve a skills mismatch. We have serious structural employment problems and no easy fix is available. The result is most likely to be a long-term drag on productivity.

  • jringo55

    There comes a time when the pay just doesn’t bring the right people to the table. The pay in far to low based on the cost of living. I know people think that people should be able to thrive on 30k a year — I suggest you try doing so. 50% of the working class grosses 30k or less. These people work in jobs you rely on daily. They are what I call your personal working slaves. The education is what was handed out to them. You can’t expect the poor to be college educated and you can’t expect everyone to have a degree. My wife has a degree. Best she can get is 18 a hour. It’s better than 30k a year but without my combined income, she would be just barely above these 30k slave wages and living in a much lower standard of life. We will likely continue on this path because lifting people up from the bottom is not as important as giving tax breaks to the rich and the wealthy corporations. Psst, these people are rich. Why do they need help? The definition of insanity is doing the same thing again and again and expecting different results.

  • Michael Carr

    You are correct. A large number of people live on low wages according to government data which might overstate actual wages, https://www.bls.gov/oes/current/oes_nat.htm#00-0000. You are also correct that we should not expect the poor to be college educated yet all too many people are induced to take student loans for educations that may not worth the money. We need public schools to prepare everyone in math and to explain the reality that college is not for everyone. We also need to understand the sharing economy is not providing fair wages or benefits and we need to stop allowing that to happen. We are making things worse in many ways, but at least recognizing that means we can hope it will get better.

  • jringo55

    You are quite possibly one of the few that agrees with what I have said. The masses only care about themselves. My wife and I get by. Remember, we don’t spend on new cars nor do we go on vacation. We buy the cheapest clothing we can find. Sometimes even at Good Will. Our combined income is not 30k but it’s not 250k either. It’s less than 100k and we are barely getting by. How are we doing so. We can’t spend. If if we wanted to spend, we can’t spend. So if 50% of the population makes less than us. They are having the same problems. The reason there is no recovery is clear. The recovery was gifted to the wrong engine. Thriving economies are consumer driven. The people who spend the engine are the working class. The working class are unable to spend and therefore, the economy is at best sputtering. America is suffering from Stagnation. It’s going to continue because govt keeps throwing the major investment to a recovery to the wrong people.

  • jringo55

    What is ‘Stagnation’

    Stagnation is a prolonged period of little or no growth in an economy. Economic growth of less than 2 to 3% annually is considered stagnation, and it is highlighted by periods of high unemployment and involuntary part-time employment. (And low wages) You want the masses to spend — They have to have disposable money to spend and be confident that their jobs are secure. For the working class, they have neither of these.

  • Michael Carr

    I agree with your conclusion but believe the cause of low wages is only partly due to government interference in the economy. Sites like Uber and Fivrr are a part of the problem. When someone accepts a low wage job out of necessity they create a cieling on wages. Forcing these web sites to meet minimum regulations would help some. We have a big problem and need to take a lot of small steps to unrig the system.

  • jringo55

    People are in survival mode. I am retired and I would like to work but working throws us into the next higher tax bracket. Therefore, my going to work is actually a loss or at best working for lower than minimum wage. When you add in gas, taxes and anguish, it’s just not worth it for me to work. Now if the tax brackets were changed to favor me in working, I might consider it.