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The job shortage
Job seekers outnumber job openings by a significant margin—in September 2010, the ratio was 5 to 1. Importantly, this isn’t the number of applicants per job opening—that number is much higher, as one unemployed worker applies for many jobs. The 5-to-1 ratio means that for four out of every five unemployed workers, there literally are no jobs. That is actually a substantial improvement over late 2009, but it is still far higher than the worst month of the previous recession and over three times as high as in 2007, before the Great Recession started.
This chart shows payroll employment over the 2000s. As of September 2010, the U.S. labor market still had 7.8 million fewer jobs than it did when the recession started in December 2007. But importantly, because the population is naturally increasing all the time, the U.S. labor market must add around 100,000 jobs every month just to keep the unemployment rate stable. From December 2007 to September 2010, the labor market needed to add around 3.4 million jobs simply to keep pace with population growth, creating a combined jobs hole (population growth plus jobs lost) of over 11 million jobs in that time. To fill in that gap in five years, the labor market would have to add around 300,000 jobs per month for that entire period.
While the previous figures have shown that, on aggregate, we have a huge jobs deficit, could it also be true that the Great Recession has caused profound structural changes that the aggregate numbers are masking? Is there evidence that part of today’s unemployment is the result of firms having job openings but can’t find appropriate workers? This chart shows the number of unemployed workers and the number of job openings by sector. If today’s unemployment is predominantly structural, then one would expect to find some sectors where there are many more unemployed workers than job openings, and some sectors where there are more job openings than unemployed workers. In other words, for structural unemployment to be a key part of overall unemployment, one would expect to find labor shortages in some areas because employers with job openings couldn’t find suitable workers. But there are no major sectors where that is happening—unemployed workers dramatically outnumber job openings in every sector. In other words, the main problem of the Great Recession isn’t that the economy is lacking the right workers, but instead that it is, across the board, lacking jobs.