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Millions of Unfilled Jobs

Daniel Gross

Daniel Gross is executive editor of strategy+business.

 

Last week, the Bureau of Labor Statistics (BLS) reported what economists regard as the most important monthly figure: the payroll jobs report. The U.S. economy added 292,000 jobs in December — an unambiguously excellent performance.

This week, the BLS released another monthly indicator, one that is less widely followed but perhaps just as important: job openings. Why the country doesn’t pay more attention to this figure is a question that always causes me to scratch my head.

On the second Tuesday of every month, the BLS releases the Job Openings and Labor Turnover Survey (JOLTS). It’s a measure of dynamism and confidence; people quitting jobs at a higher rate is a good sign of confidence, and the number of openings provides a window into the mind-set of corporations.

The news is superficially excellent. At the end of November 2015, there were 5.43 million jobs open in the U.S. That figure is up 11 percent, or 545,000, from November 2014. It’s an impressive gain of 3.29 million, or 152 percent, from the low of July 2009, the month the recession ended.

Job openings are something of a lagging indicator. Companies have to be reassured about the health of the economy before they decide to open new stores, build new factories, or expand offices — then, and only then, do they hire the people to build and fill them. But I also find this monthly figure to be a little mystifying — not the rise so much as the quantity. I mean, 5.383 million is a lot of jobs; it’s roughly equivalent to the number of jobs in the large state of Ohio (about 5.4 million).

The figure speaks to a large and growing need for workers. And it seems like companies should be doing a better job of filling the job openings. In the last several years, a host of technology trends — mobile communications, zippy user interfaces, robust payment systems, powerful platforms, and online markets — have made it much easier for buyers and sellers of goods and services to meet one another and carry out transactions. You can summon a driver to your home in five minutes with the tap of an app, sell 100 shares of a thinly traded stock in a millisecond from your desktop, and book just-released hotel room inventory instantaneously from your iPad. Put another way, markets are becoming more efficient with each passing year.

In theory, technology should also make it easier to fill positions than ever before. Hirers can quickly broadcast the availability of work on thickly trafficked social networks, use LinkedIn to find interesting prospects, conduct interviews via Skype, offer testing and skill assessment online, check references via text, and let sharp algorithms set the appropriate mix of wages and benefits. With the plethora of social networks and job listing sites, including LinkedIn and Vault, workers too have never had a greater ability to learn more about potential employers and positions (near and far), to gauge the relevance of their skills, to learn about corporate culture, and to figure out the just-right amount of compensation to demand.

All things being equal, we should expect the number of job openings to fall over time — or to at least hold steady. But the data suggests that the labor market — it’s a market, after all, where people are constantly bargaining for the right price — seems to have become less efficient since 2009.

Why is it that hiring, perhaps alone among corporate functions, hasn’t meaningfully improved its efficiency in recent years?

Why is it that hiring, perhaps alone among corporate functions, hasn’t meaningfully improved its efficiency in recent years?

It’s a particularly compelling question when you consider how incremental improvements would make such a huge difference. Just imagine if the U.S., as an economy, were simply 10 percent more effective at filling open positions than it is now. That would mean that instead of 5.4 million job openings every month, there would be 4.86 million. That would mean an additional 540,000 positions filled — 540,000 more people working, paying taxes, producing goods, and servicing customers.

We tend to talk about jobs in the aggregate. But they make a massive difference at the individual level. Beyond a simple paycheck, a job can give someone a sense of purpose, grant a family access to vital benefits, instill pride, and make it easier to make a mortgage payment. For companies, filling a position could mean the difference between doing more business or doing less business. The same holds for institutions. A school with 10 teaching vacancies is one that isn’t performing at its full potential, just as a restaurant with 10 vacant server positions likely isn’t living up to its productive capacity.

To be sure, some companies can’t find people with the right skills for the right positions. Some employers aren’t offering sufficient wages to get people to apply. Many companies may post openings but lack a sense of urgency about filling them because of concerns about the future. And it always takes time to find the perfect person for a post. The labor market involves humans making complex human decisions, so it will never be a perfectly efficient one.

Still, I believe these factors account for only a portion of the high level of job openings. Looking at the data and the external environment, it’s hard not to conclude that the hiring process is ripe for some disruption.

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Millions of Unfilled Jobs