As the labor market continues to recover from the COVID-19 pandemic, many firms have had trouble finding and retaining workers. This is a sign of a strong labor market where firms need to compete to find the workers they need. One way to understand this issue is to look at the trend of labor market tightness, defined as the number of job openings over the number of unemployed workers in the economy.
Estimates for the number of unemployed workers are generated each month by the Bureau of Labor Statistics (BLS) by surveying a representative sample of households in the United States. An unemployed worker is an individual who does not have a job and is available and looking for work. Estimates on job openings come from the Job Openings and Labor Turnover Survey (JOLTS). In this survey, the BLS uses data from establishments (places of work) to construct measures of employment, job openings, and worker separations. Similar to unemployment, an establishment is deemed to have a job opening if a position exists that could start within 30 days, and the employer is actively recruiting workers from outside the establishment to fill the position. Notably, the BLS began to release monthly estimates of state-level data for JOLTS in August 2021, which supplements their monthly state and local level employment reports.
Figure 1 uses data from JOLTS to plot the number of job openings divided by the number of unemployed workers, labor market tightness for South Carolina, states in the South region, and nationally. In the graph, a value of 1.0 means that there is a job opening for each unemployed worker, and the dates of recessions are shaded in grey. Labor market tightness is cyclical, rising during economic expansions and falling during recessions. Before the financial crisis in 2008, South Carolina had fewer job openings per unemployed worker than both the national average and the southern states. After the financial crisis, all three regions had similarly low labor market tightness and recovered until 2017. Between 2017 and the pandemic in March 2020, labor market tightness in South Carolina reached levels above 1.5, higher than the South and National averages, which were around 1.25. While labor tightness again crashed during the pandemic, it has returned rapidly, with South Carolina again outpacing both the national average and the south.
While much discussion about the tight labor market focuses on pandemic-related factors, the figure highlights that South Carolina and the nation were already experiencing tight labor market conditions before the pandemic. Hence, explanations for the tight labor market should look beyond pandemic-related factors like health risks and child care needs induced by school closures. Some potential causes include the aging of the workforce (increasing numbers of retired workers that may have been accelerated by the pandemic), changes in patterns of young workers entering the workforce, reductions in immigration, or other factors that reduce labor force participation. On the other hand, while presenting challenges for employers, high job openings are also a sign of high demand for workers in a rapidly growing economy. This should help increase wages for many workers in the economy.
