This blog post by a PwC senior discusses the question of why employers' hiring metrics such as time to fill are showing more difficulty, while the unemployment rate remains relatively high.
My chart shows the percentage of the US population ages 25 and up that was employed, dating from 1948. This chart makes employment trends look a lot worse than the official unemployment rate does. Official joblessness has fallen from 10% at worst to the most recent 8.7%. The differences: 1) the number of people who aren't seeking work increased by a lot after the recession, and it's not clear that the labor force participation rate has bottomed yet; 2) more Americans under age 25 have been staying in school (or at home) instead of pursuing work.
Americans 16-24 not in the labor force (not pursuing work) are up 16% -- 2.4 million -- in five years. Their unemployment rate, among the 55% who even want to work, was 16.5% last month, down from the cyclical peak of 19.1%, up from the low point of 9.9% in 2007.
The blogger's point of view -- likely influenced by his consulting practices -- was that employers' unwillingness to train workers for hard-to-fill jobs explained much of the hiring problem, noting that recruiters were trying to cherry-pick new hires and waiting for perfect qualifications before making a hire.
Seems dead-on accurate, by my experience. But the author only brushes past the question of why people are staying unemployed for so long.
1. It's not all just deadbeats on long-term unemployment insurance. The level of people drawing regular UI benefits (meaning they lost their jobs within the past six months) is higher than historically would be explained by the level of initial jobless claims in the previous year. Job losses are relatively low. Unemployed people who permanently lost their most recent jobs reached 5.4% of the US labor force in October 2009. This rate was as low as 1.5% in 2007. It was 3.9% in February, a level modestly below where it had peaked in the 1980-82 recession (previous alltime high in data back to 1967).
2. This recession should be remembered for the stickiness of unemployment, not the velocity of job cuts. The percentage of Americans unemployed for less than five weeks never got higher than 2.3% of the labor force after 1993. That's right, 1993. It stayed between 2.5-3.6% for almost every month between 1971-93. This is probably because the volume of temporary seasonal layoffs fell dramatically in response to government efforts to keep employers from using unemployment insurance as corporate welfare.
3. When it's long, it's very long. One can estimate the average duration of long-term unemployment by working off the government's average and median duration of unemployment statistics as well as the numbers of people unemployed according to duration. While the average duration of unemployment last month was 40 weeks (not far off the cyclical high), I estimated the average duration of unemployment for people out of work at least 27 weeks to be more than 80 weeks. This number had stayed generally between 50 and 60 weeks from 1983-2010. For people out of work this long, there's a strong influence from the unprecedented generosity of long-term UI benefit programs.
4. Hiring has barely recovered. From 2005-07, US employers hired more than 60 million workers per annum, according to the Job Openings and Labor Turnover survey. Employers hired only 46 million workers in 2009 and 50 million in 2011. Yes, gross hiring is 8% off trough level, 21% below peak. This when job openings are 50% above their trough level.
Slow employment recovery cannot be explained solely by claiming that employers are too picky. Main reasons why:
- Older workers whose high-paying jobs disappeared. Employer might have failed or relocated, industry contracted, or job was automated away. Older people likely have families they want to stay near, financial obligations they cannot meet unless they get similar work. And finding similar work may be impossible without making major compromises (pay cut, seniority drop, relocation with little to no reimbursement).
- Entry-level work force finds older people in their seats. Labor force participation by people ages 55 and older has been on the rise for about two decades. Some of this is Baby Boomers retiring later (two factors there, the population of Baby Boomers and working later in life). Some is the influence of people 65 and older returning to work part-time, often entry-level jobs. Investment markets have not been kind to retirement savings. With entry-level jobs consumed by older people, young people wait longer and longer to enter the labor force. I find the caliber of young people who are seeking unpaid internships to be outstanding. They just want something substantial to put on the resume, even if it's for free.
I agree wholeheartedly with the notion that somebody in this country might win bigtime by figuring out how to use the enormous pool of available labor. How enormous? Let's say 65% of the US adult population would be employed in good times, as was true in 2007. We need to employ about 8 million more people to get there.