The Labor Market Is Tight Despite High Unemployment

empty black rolling chairs at cubicles

A banker in North Carolina says that his greatest challenge is finding talent, as does one in Oregon. The owner of a large nursery in Minnesota reports that seasonal workers are hard to find. A real estate developer in Washington state reports that the availability of construction workers is a major constraint on new housing. The same story comes from two mid-sized manufacturers in Oregon. How can the labor market be tight with unemployment at 6.3% of the labor force? And Federal Reserve chairman Jerome Powell recently said that the real unemployment rate is closer to 10%. Yet business leaders have trouble finding workers.

Many of the unemployed are not available for jobs that need to be filled, with multiple reasons. Some lack the right skills for the open positions, others prefer not to change occupations, still others are not looking for work because of child care responsibilities, discouragement about their job prospects or preference for collecting unemployment insurance over earning wages. Employers should ignore the unemployment stories in the press and focus, instead, on employee recruitment and retention.

Millions of people lost jobs in the pandemic. The largest group were laid off in March and April 2020, but layoffs continued above pre-pandemic averages even in recent weeks. Several factors, though, prevent these people from filling the positions that are open.

Some people who lost jobs decided it was time to retire. That’s common for many people who are near the usual retirement age. They will keep working while they have a job, but they won’t go looking for a new job if laid off. In the pandemic, though, the normal pattern was accentuated by people fearful of contracting COVID-19.

Every recession results in some people too discouraged to bother looking for a job. These folks are not counted in the headline unemployment rate, but they do show up in other measures of unemployment. Discouragement is probably higher this time around, especially for people with specialties in leisure and hospitality.

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