The most pressing issue many employers face as the pandemic begins to reside and the economy opens up is finding enough workers. Data indicates this worker shortage is holding back growth and posing an impediment to a robust economic recovery.
May’s jobs numbers, while stronger than they were in April, still fell below expectations. This week, the Bureau of Labor Statistics released its job openings reports–JOLTS–for April, showing job openings are at an all-time high at 9.3 million, quits are also at an all-time high, and layoffs are at an all-time low. Clearly businesses are desperate for workers, and workers are confident they can land jobs.
Worker Availability Ratio
To better understand the labor market situation, we’ve brought back the Worker Availability Ratio–WAR for short. The U.S. Chamber developed this analysis in 2019 to measure the number of available workers for every job opening.
In calculating the WAR available workers are classified as unemployed workers plus those marginally attached to the workforce. For April, the WAR stands at 1.2, meaning there are 1.2 workers for every open position. In April of last year, the WAR was 5. That was at the height of the COVID-19 lockdown. The ratio has fallen sharply since then, because of both a decline in unemployed workers and a sharp uptick in job openings. In April alone businesses created one million new openings.
Before the pandemic, the WAR was hovering around 1, a sign of record tightness of the labor market at the time. For context, the average WAR over the previous two decades was about 2.8 available workers per open job.
We are now almost back to that level of historic tightness. Pre-COVID, businesses were struggling to fill opening because the available workers lacked the skills businesses needed. That issue persists now, as evidence by multiple surveys of businesses looking to hire. Add on top of that the issues created by COVID-19 (childcare, generous government benefits, and remaining fear of contracting the virus) and businesses are struggling even more to hire.
Reducing the Shortage
This worker shortage will continue until we can match workers’ skills to those businesses need. Taking on that challenge is why the Chamber launched the America Works initiative.
From employer-led solutions for improving worker training programs to expanding access to childcare to ending supplemental unemployment benefits to increasing legal employment immigration, there are concrete steps the public and private sectors can take to alleviate the crisis.
If we fail to address this problem employers won’t be able to meet the needs of their customers, more business will be put on hold, economic growth will be stymied, and the chance for the “Great Resurgence” will be lost.
Americans have worked too hard to beat the pandemic to miss this opportunity to rebound and thrive.
Methodology
To calculate the Worker Availability Ratio, we first establish the total number of available workers by adding the total “unemployed” individuals (those who actively sought work that month) and the total “marginally attached” individuals (those who did not seek work that month but say they want and are available for work and have sought work in the past year), as reported monthly. We then divide the total “available workers” by the number of job openings, as reported in BLS’s monthly Job Openings and Labor Turnover Survey (JOLTS).
The data used in these calculations is all “not seasonally adjusted” because BLS does not publish seasonally adjusted estimates for the “marginally attached” series.