Jason Faberman, an economist at the Federal Reserve Bank of Chicago, likens the job market to a game of musical chairs: If no one gets up, there isn’t any room for anyone else to sit.
In March, U.S. employers added a net 88,000 jobs, the fewest in nine months and less than half the pace of the previous six months.
Federal Reserve Chairman Ben Bernanke has said that total hiring, as gauged by the JOLTS report, is something he and other Fed officials track in assessing the job market. The Fed has said it plans to keep short-term interest rates at record lows at least until unemployment falls to 6.5 percent.
Steven Davis, an economics professor at the University of Chicago, says his research shows that companies aren’t filling jobs as fast as they did during the recession. Jobs now remain unfilled for an average of 25 days. That’s up from about 16 days in mid-2003, when the job market was recovering from the previous recession.
Davis cites several reasons for the change. Companies may remain uncertain about the outlook for the economy. And if the outlook worsens after a company posts a job opening, they may not fill it.
With unemployment high, the cost of missing a good hire doesn’t seem as high, Davis says. Managers may figure they can always find someone just as qualified later.
And a bigger proportion of job opening in the United States are in health and education. Those take longer to fill, partly because of higher skill and education requirements. Lower-skilled jobs in areas such as construction have declined.
Some economists also say that there may be a mismatch between the skills the unemployed have and what employers are seeking. Some manufacturers, for example, have reported difficulty in finding higher-skilled machinists, according to the Fed’s Beige Book, which provides anecdotal information on economic conditions across the country.
“It’s a different labor market than we’ve had in the past,” says Cooper Howes, an economist at Barclays. “We have to readjust our expectations of what a healthy labor market looks like.”
All of which could make it harder to reduce unemployment. Howes says a “normal” level of U.S. unemployment may now be around 7 percent, rather than 5 percent to 6 percent.
Other economists doubt that a skills mismatch is playing a significant role. Elise Gould, an economist at the liberal Economic Policy Institute, says there are more unemployed people than jobs in almost every industry. That suggests that a broad slowdown in the economy is to blame, rather than a shortage in any particular sector of the economy.
Some companies may also have slowed hiring after steep government spending cuts began taking effect March 1. Those cuts are expected to shave about a half-point from economic growth this year.
Peter Cappelli, a management professor at the University of Pennsylvania’s Wharton School of Business, says that until employers fill a job opening, they feel they’re “saving a ton of money by leaving the position open.”
That dynamic won’t change, Cappelli says, until the economy grows fast enough that people feel comfortable about quitting to find jobs elsewhere.