News stories feature a consistent theme: It’s difficult for employers to find workers. This worker shortage is holding back the economy, and it needs to be fixed somehow.
There are some reasons to believe that story. The number of job openings is at record highs.
Demand for workers is strong based on the number of job postings at sites like Indeed.com. According to The Wall Street Journal, postings “were up about 39% at the end of August from February 2020, ahead of the pandemic. That marked a modest gain from the comparable week of July, when postings were up 37% from February 2020.”
Government employment data supports the impression that jobs are plentiful. The Job Openings and Labor Turnover Summary, or JOLTS, showed that there were 10.9 million unfilled jobs at the end of July, which is more than the number of unemployed people.
But there is more information in JOLTS that seems to indicate that the labor market isn’t as strong as it seems. The quit rate was 2.7%. This is higher than its pre-pandemic level of about 2.2%, but it doesn’t suggest that prospective employees believe the job market provides them with plenty of choices.
Quit Rate Is Spiking
Employment Data Points to a Mismatch
Employers are also continuing to lay off employees at about the same rate they did before the pandemic. In July, the layoff rate was 1%, little changed from the 1.2% rate seen before the pandemic.
Wages are up significantly since the pandemic shut down the economy. Average hourly earnings are up 7.8% since February 2020. During the recovery, wage growth consistently outpaced increases since data became available in 2007.
The data indicates that the labor market is splitting in two. Higher-paying jobs offer security and seem to be hard to fill; lower-wage jobs are available, and there could be more wage jobs now than there were before the recession.
There seems to be a structural mismatch in the economy. Employers can’t seem to find workers they believe are qualified for the jobs they want to fill. In the long run, this will have important implications for the economy. In the short run, the stock market will ignore this development until it becomes a crisis.
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Michael Carr is a Chartered Market Technician for Banyan Hill Publishing and the Editor of One Trade, Peak Velocity Trader and Precision Profits. He teaches technical analysis and quantitative technical analysis at the New York Institute of Finance. Mr. Carr is also the former editor of the CMT Association newsletter, Technically Speaking.
Follow him on Twitter @MichaelCarrGuru.