Are Job Openings Overstated?

We are now engaged in the difficult exercise of determining how quickly inflation will recede. The endeavor has forced us to delve deeply into the details.

A good example is our analysis of the U.S. labor market. As we wrote recently, it is difficult to reconcile all of the data: we have strong job growth, a plethora of job openings and yet wage gains have weakened over the past few months.

Some suggest, though, that demand for labor isn’t what it appears on the surface. Updated readings from the Bureau of Labor Statistics this week showed 10.8 million available posts, which compares to just over five and a half million people who are looking for work. The ratio of 1.9 between the two remains very high by historical standards.

The near-record number of job openings may be somewhat misleading.

Alternative measures of job openings, however, are not showing the same number and breadth of vacancies. Indexes kept by job sites like Indeed and LinkUp show much slower growth in postings. These series are based on actual counts, while the Labor Department’s job opening series is based on a survey. Response rates to that survey have been running at 32%, half the level seen prior to the pandemic. That diminishes the value of the series.