Unemployment is at a generational low, 3.7 percent as of September 2018, while job openings are at a record high of 7.1 million; there are more jobs than there are unemployed people looking for work.
How are the labor statistics determined?
The official unemployment rate is determined by a subdivision of the Department of Labor called the Bureau of Labor Statistics (BLS). Unemployment is the number of people who are jobless, looking for work and able to take a job. The formula BLS uses is to add the number of employed people to the number of unemployed people, which equals the labor force. Then they divide the labor force by the number of unemployed people. The number of unemployed is a percentage of the total labor force.
The BLS reports on other labor numbers as well, several of which are intuitive. For example, there is the “quits rate,” which is exactly what it sounds like: people who leave their jobs willingly. When the unemployment rate is low, people feel comfortable leaving their jobs because they believe it will be relatively simple to find a new one and the quits rate goes up. The quits rate is at 2.4 percent, a 17-year high. On the other hand, there is the “layoffs and discharges” rate, which is also what it sounds like and it is at 1.1 percent. When the unemployment rate is low, the layoffs and discharges rate is low because employers try to recruit and retain workers.
Job Openings: Another labor number to consider
According to the Bureau of Labor Statistics, the ratio of unemployed persons per job opening also varies with the strength of the economy. In December 2007, at the beginning of the most recent recession, the ratio of unemployed persons per job opening was 1.9. In June 2009, at the end of the recession, there were 6.1 unemployed persons per job opening. In August 2018, with the low unemployment numbers, the ratio of unemployed persons per job opening was at an all-time low of 0.9.
In the business cycle, the relation is clear: when the economy expands, the job openings rate is high and the unemployment rate is low. When the economy contracts, the job openings rate is low and the unemployment rate is high.
Online job offerings affect the job openings number
With online recruiting, the reported number of job openings may not be as accurate as they once were when they were listed in the Classified Section of the daily newspapers. It is both easy and inexpensive to post jobs on the internet with sites such as Indeed.com or Glassdoor. Many employers keep openings listed just in case there is turnover and they need to fill an opening. That’s those pesky “quits.” They may not actually have an opening to fill. Employers also are known to want to collect and peruse resumes even if they don’t have an opening to fill in case someone comes along who is too good to pass up.
Unemployment is not the only labor statistic worth knowing when looking at the strength of the labor market. Job openings, the number of people voluntarily quitting their jobs and the number of people who are fired also give valuable information about the strength of the economy.
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