Job Openings Up 50 Percent, Hiring Up 5 Percent
A lot of new jobs are being advertised but not many people are being hired to fill them. Peter Orszag doesn't know why.
A lot of new jobs are being advertised but not many people are being hired to fill them. Peter Orszag doesn’t know why.
Orszag raises the question, “With So Many Job Openings, Why So Little Hiring?” in an opinion piece for Bloomberg that, interestingly, offers no opinion on the matter.
An odd puzzle is taking shape in the labor market: Over the past three years, the number of job openings has risen almost 50 percent, but actual hiring has gone up by less than 5 percent. Companies are advertising a lot more jobs, in other words, but not filling them.
To get some sense of how significant this is, consider that if, since June 2010, hiring had risen a third as much as advertised jobs have (rather than only a 10th), and nothing else were different, job creation would be roughly 500,000 higher each month, and the unemployment rate would already be back to normal levels.
So what explains the yawning gap between jobs open and jobs filled?
Orszag floats four theories that have been offered:
- There’s a mismatch between the skills needed and those available on the market
- Employers are offering wages too low to attract applicants
- Jobs are mostly being filled with internal candidates
- Firms have reduced their “recruiting intensity,” and just aren’t that excited to fill openings
He argues pretty good reasons to discount any of these as likely explanations for much of the gap. He concludes,
Regardless of the true explanation, it’s still good news that more jobs are being advertised. That wouldn’t be happening if the economic outlook were entirely bleak.
But, if nobody’s hiring, the economic outlook is pretty damned bleak for the unemployed and underemployed.
UPDATE: Over at his place, Dave Schuler suggests:
It also might be the case that companies are fishing. In my field it used to be common practice both for employers and workers to put out feelers. Employers would advertise jobs with unrealistically high requirements and unrealistically low compensation to see what they’d get. Workers would apply for jobs making absurdly high wage demands to see what was out there.
In a buyer’s market or even what’s assumed to be a buyer’s market employers may be putting out feelers of this kind to see what’s out there, to test the wages they’re offering, and maybe get somebody who’s better for less money. By doing this they’re also bolstering their case that they need to import foreign workers because nobody in the domestic job market has the skills they need.
Some good answers are also bubbling up in the comments.
WR:
I’d guess that companies see a buyer’s market and are searching for candidates who come completely qualifiied and trained for their specific position and then want to pay as little as possible. When they can’t find one of the six people who will require absolutely no training or direction, or when they find him and he refuses to work for $8.75 an hour, they just force their regular employees to do more work for the same or less pay.
Stormy Dragon adds, “Mix of all of the above: companies only offer entry level salaries, but want highly experienced employees, yet refuse to do any sort of development or training to develop that experience.”
Ben, drawing on his experience in the Network Engineering world, complains,
When writing the job requirements, companies are asking for the moon: 10 years experience, detailed experience with dozens and dozens of different protocols, software suites and hardware vendors, they want employees who are ok with travel, on-call and overtime without any additional compensation (for salaried positions). And the salaries they’re offering are below what the same position made a decade ago when I got out of college.
Most of the people I’ve spoken to see those requirements, and when they don’t meet them, they don’t even bother applying. Even if the company would accept a candidate that didn’t meet all the reqs, the candidates don’t even try because they don’t think they’re qualified.
This comports with my anecdotal experience in the media and nonprofit sectors.
The combination of all this is a lot of bitter, disillusioned job seekers who aren’t bothering to apply for jobs.
A lot of companies are refusing to even consider people who’ve been out of work for more that a fleeting amount of time. Or who don’t currently have a job already. Considering the vastly undercounted number of potential workers that cuts out, it’s not really a mystery at all…
No, it’s not good at all. It means that people fill out application after application — and all are increasingly long and tedious and intrusive — and never hear back, increasing both cynicism and despair.
And from the anecdotes I’ve heard, I’d guess that companies see a buyer’s market and are searching for candidates who come completely qualifiied and trained for their specific position and then want to pay as little as possible. When they can’t find one of the six people who will require absolutely no training or direction, or when they find him and he refuses to work for $8.75 an hour, they just force their regular employees to do more work for the same or less pay.
Mix of all of the above: companies only offer entry level salaries, but want highly experienced employees, yet refuse to do any sort of development or training to develop that experience.
I can only speak knowledgeably about my particular sector (IT/Network Engineering/Network Security), but the primary issue I’ve seen is basically what wr and stormy say above. When writing the job requirements, companies are asking for the moon: 10 years experience, detailed experience with dozens and dozens of different protocols, software suites and hardware vendors, they want employees who are ok with travel, on-call and overtime without any additional compensation (for salaried positions). And the salaries they’re offering are below what the same position made a decade ago when I got out of college.
Most of the people I’ve spoken to see those requirements, and when they don’t meet them, they don’t even bother applying. Even if the company would accept a candidate that didn’t meet all the reqs, the candidates don’t even try because they don’t think they’re qualified. When I was looking last year, I had the same feelings, but said “screw it” and applied anyway. They ended up hiring me, even though I didn’t meet even half of their requirements, and I was able to talk my salary up a good 15 percent over what the listing offered. But I almost didn’t even try.
I’ve told my boss that he really really needs to change those job reqs because it’s scaring away potentially good candidates.
My sense is that a lot of the openings are designed to poach talent from competitors.
I can only speak for the firm where I work…we cannot find qualified people with experience fast enough to fill our needs.
Typically we would be looking for someone with 2-3 years experience after graduate school.
With the Bush Contraction beginning in ’07-’08…anyone who graduated in the subsequent 5 years probably does not have any experience…because there were no jobs in which to gain experience.
We are interviewing plenty of candidates with advanced degrees…just not real work experience.
I am currently working on a $60M project…with 1 experienced staff member and 4 “green” hires.
Excellent experience and training for them…but I’m up at 3:00am a lot these days.
The good news is that the economy is coming back stronger everyday…in spite of the efforts by a major political party.
According to the comments, it’s actually because of Obama’s war on the economy. Also, because the government pays people to not work. Because, I’ve been told, it’s better to make 29,000 a year and be on food stamps than to make 60,000.
I’m not really looking to run cover for the administration, but am I wrong in feeling that we’re just seeing results that were baked into the cake decades ago?
@wr: We see a buyer’s market around here, with people lining up for jobs at theme parks and movie theaters. Our local McDonald’s has a full house at their monthly hiring meetings. When you have that kind of market, there is no incentive to pay higher than the minimum wage. The unskilled openings are being filled largely by students, retired people, and people between (hopefully) jobs. The problem is that a lot of people are having to stay in those kind of jobs because other prospects are not good, or their previous jobs were eliminated and their age might be a kind of problem. So the monthly economic reports on people going back to work might be kind of misleading unless these situations are included.
HR Department to applicant: Do you have 5.7 years experience in working with Software Version 6.054?
Applicant: I have 5.8 years experience working with Software Version 6.053.
HR Department: Sorry.
From the engineering side I can tell you there’s a certain # of job listings that are crafted with obscure needs to fit overseas talent in need of a visa. The stupid requirements are not intended to be satisfied by domestic respondees.
This present situation of high underemployment and is tied to the unmotivated animal spirits, austerity and disinflation.
@Tyrell: “When you have that kind of market, there is no incentive to pay higher than the minimum wage.”
Of course there is — for any company that is interested in anything further away than the end of the quarter.
If you pay minimum wage and treat employees badly — and shockingly these two states of being often go together — you are going to get workers who will stay on this job only until they can find something different. Maybe not even better — just different. And unhappy workers who are eager to pass on their misery to the customers.
If you pay a decent wage and treat your employees well, you get happy workers who are eager to work harder to make the company thrive, and who will stick around for a long time, eliminating the need for constant training (and ignorant employees). That’s why shopping at Costco and Starbucks is frequently a pleasant experience, and shopping at WalMart and McDonald’s so frequently not.
James:
In my own post in reaction to Dr. Orszag’s op-ed this morning I mentioned two of the factors that I see suggested above in comments: employers won’t hire the long-term unemployed and they’re building a case for H-1Bs.
The question now is what should be done about the situation? The prescriptions that are being offered including more education, greater infrastructure spending, etc. really don’t do much about the problems now, particularly those of the long-term unemployed who, according to the BLS, constitute about 40% of the total.
Well no…not if your only interest is $$$.
There was a time when owners of companies were concerned with communities and the people who lived there. You would think the Republican party…which longs for the good old days…would be interested in that. Unfortunately they are longing for some fictional time that defies description…or analogy in our history.
Anyway…If you are interested in producing something of quality…whether it is as simple as a killer burger, or as complex as building a business…you might think differently about paying people as little as possible and fvcking them over as much as possible.
I don’t expect you to understand, Tyrell.
@michael reynolds:
Funniest job posting I ever saw was in 2003 or so, requiring at least 15 years experience in Java development (which was originally released in 1996).
The jobs are low-paying part-time service jobs. (Think Mickey D’s.)
@legion: I do think that’s part of it.
@Stormy Dragon: I’ve seen a lot of that myself in the media and nonprofit sectors.
@Dave Schuler: The “Jobs Americans won’t do” issue, when it means “Jobs Americans won’t do for $25,000 a year,” is worrisome. I don’t know what to do about it, though.
Have we tried tax breaks for employers who hire and retain the unemployed? Sounds like something that should appeal to both sides.
@Gromitt Gunn:
it probably would, until Obama came out in favor of it. I think his best move would be reverse psychology, proclaiming he would veto it if it came to his desk.
As someone currenly in job search mode, I have to agree with the comments above about it still being essentially a buyer’s market for employers. It’s been 2 1/2 decades since I’ve had to look for a job, but I had always (possibly over-optimistically) envisioned that I would have a fairly good selection of choices about where to take my knowledge and experience when I was finished with the military. Instead, on some days, I almost feel like looking for a job is akin to playing the lottery.
p.s. and I’m actually lucky … there’s a whole lot more help out there for veterans than there is for the average civilian job seeker.
@wr: But would that not make prices go up at places like movie theaters and theme parks? It already costs too much to get and the food is outrageous.
Sometimes the reverse situation occurs: job openings that aren’t advertised. Just last night I was in my local supermarket, part of a major regional chain, and there was a “help wanted” sign on the entrance door seeking workers in several departments. After reading this post I checked Careerbuilder and Craigslist, and found nothing matching these openings. Nor is there anything on the supermarket company’s site.
A comment to the Bloomberg article notes that survey methodology may help explain this gap. It is possible that a single job being advertised at multiple sites might be counted as multiple jobs when in fact there’s only one job and it can be filled only once.
Trying to match supply and demand in the labor markets (there are thousands of them, not just a “labor market”) is one of the black arts. I think too many employers have gotten accustomed to the past few years with labor in oversupply; they think this is the new normal. Of course, the politics of getting an H1B for some pet candidate from abroad may also play a role.
Read the headlines in the financial pages these days – companies are extremely short-term and bottom line oriented now. Many companies meet earnings targets and announce plans to cut job at the same time. Profitability is not enough, the first priority for most CEOs is sending up strong earnings reports to their Board and to shareholders. After-tax corporate profits as a share of GDP are at historical high points.
The great recession of 2008 destroyed millions of jobs and as, over the past 4 years, balance sheets have steadily improved, companies have been reticent to go all in on job growth and related investments. People are now finally realizing the considerable damage done to our economy by the implosions of capital and housing markets in 2008 – it is both financial and psychological.
@Peter:
That’s not limited to jobs posted in the windows of supermarkets. To get an H-1B visa allocation a company needs to have advertised the position and had no takers. One way to satisfy the requirements of the law while evading the law is to advertise obscurely.
@Andy: “My sense is that a lot of the openings are designed to poach talent from competitors.”
Then we’d be seeing good salaries mentioned. Has anybody seen those posted?
@C. Clavin: Clavin, if you are real, you won’t mind posting specifics – company, position, salaries.
My division just received authority to hire for a newly created position. The base job requirement is familiarity with a variety of databases, being able to dissect mistakes, and be reasonably smart. Pay is in a fairly wide band that is decent money at the end of entry level and beginning of mid-career.
My boss and I wrote up our initial requirements and came out to under a page. HR’s response was four pages. Under the initial requirements, I had a half dozen acquaintances or 2nd degree contacts who fit into the desired bucket. Under HR’s response, only one of them would have made it to our desks for first round interviews.
@Snarky Bastard: That’s the weirdest thing I’ve ever heard. Mind if I ask what requirements HR was adding?
@Megan McArdle:
3 to 5 years experience in similar industry and relevant master’s degree OR
5 to 10 years experience with a limited list of acceptable BS (this was about a half page)
Willingness to relocate with appropriate conditions ( the biggest relocation my department has ever done was three blocks)
Willingness to travel more than 75% of the time (I have had 2 travel days in the past three years, my boss averages 1 travel day a month)
Multi-lingual a plus with a scoring system for different languages (my division needs people to speak Geek, English, Yinz and a preference for Nerd, company has minor requirements for Italian and Arabic speakers, but my division has never had to interact with those units)
Demonstrated history of implementing projects of X or Y size (2 of X size, or 1 of Y size) with appropriate documentation
etc
Basically what we think happened is that the job classification that we are looking for crosswalks into a few different things at Corporate HR, and they decided to throw the kitchen sink at the job description.
After reading this and thinking about how it makes the case for additional H1B visas, I suddenly understand why large tech companies often keep >10,000 job openings unfilled year after year. That policy never made sense to me before now….
@Snarky Bastard: That’s insane. Sounds like an epic fail at HR.
Catbert isn’t the evil HR Director for nuthin’
I’m remembering my interviewing for a position in Las Vegas associated with IP. After everyone got their mitts on the job description and added everything including the kitchen sink, they were demanding a host of things that legally could only be done by an attorney, wanted the person to be bilingual in English and Japanese, and couldn’t understand that they weren’t going to get that for $60K or less…. (I talked to our own General Manager and she agreed with me that for what they were asking, they would have to be offering over $100K and better over $140K.) So you can add dimwitted HR people not understanding what they’re asking for to the mix.
(By the way–hello again to everyone who may have wondered where I disappeared to. Finished the J.D., now have the Bar to pass. Also I’ve got a new company to goose into existence so will be participating very sporadically.)