The intricacies of the American labor market have become a huge focus for workers, bankers, and lawmakers, but the outlook is constantly evolving. There are different metrics to consider, some of which may be more accurate than what’s provided at face value. The overall market conditions hold quite a bit of weight when considering economic decisions, but what does it mean when key indicators provide conflicting answers?
Central bankers hold quite a bit of control when it comes to slowing inflation, keeping close eye on the labor market. If the market isn’t cooling at an expected rate, they may choose to throttle the economy to slow inflation. Some worry that bankers could take those precautions a bit too far, causing more harm than good.
What’s a tight labor market?
A tight labor market happens whenever companies are fighting over a small pool of labor to fill open position. Most would say that this describes the state of the labor market over the past 2 years.
What’s a loose labor market?
Essentially, just the opposite. A loose market describes a large pool of individuals duking it out for a small assortment of jobs openings.
The Fed uses a ratio of vacancies per unemployed worker is used to determine the state of the market, with the ideal market falling somewhere comfortably in the middle. As of April 2023, there were 1.8 open positions per every unemployed worker, which sounds pretty great if you’re someone who’s looking for a new career move. However, LinkedIn’s metrics may provide a closer look at the conditions of the current labor market. Back in May, there were .6 job openings per active applicants on the sight, a sizable decrease from 1 opening per person at the end of 2022.
So, what’s causing the discrepancy? LinkedIn’s metrics account for every user who’s applied for a job in a given month, not just unemployed folks. As life continues to roll back to pre-pandemic ways, some workers find themselves clamoring for change. Those workers are also competing against unemployed workers, some of which have struggled for months on end to find a suitable position.
Chances are you know someone who was laid off within the past year or two. Chances remain high that that person struggled a bit to transition into a new job, with many, including myself, expressing frustration with not finding suitable employment opportunities, even in the most in-demand fields. This metric seems truer, since the Federal Government’s ratio does not account for currently employed job-seekers.
The significance of accurately analyzing the labor market conditions is far-reaching, influencing the diverse metrics that dictate our nation’s financial trajectory. It’s important to review all data and the implications so that we can all gain a more comprehensive understanding which allows us to make the most informed decisions, both for our personal careers as well as our business ventures.