High Unemployment Since 2000

Scott Winship:

There are somewhere between three and five out-of-work job-seeking Americans competing for each job opening. As shown in the chart below, competition for jobs among the unemployed remains greater than any time before the financial crisis, stretching back to the Great Depression.

From 1951 through 2007, there were never more than three unemployed workers for each job opening, and it was rare for that figure even to hit two-to-one.  In contrast, there have been more than three jobseekers per opening in every single month since September 2008.  The ratio peaked somewhere between five-to-one and seven-to-one in mid-2009.  It has since declined but we have far to go before we return to “normal” levels.

The bleak outlook for jobseekers has three immediate sources.  The sharp deterioration beginning in early 2007 is the most dramatic feature of the above chart (the rise in job scarcity after point C in the chart, the steepness of which depends on the data source used).  But two less obvious factors predated the recession.  The first is the steepness of the rise in job scarcity during the previous recession in 2001 (from point A to point B), which rivaled that during the deep downturn of the early 1980s.  The second is the failure between 2003 and 2007 of jobs per jobseeker to recover from the 2001 recession (the failure of point C to fall back to point A).

The next chart shows trends in job openings and in unemployment separately to tease out the dynamics in play.

Unemployment increased during the 2001 recession, but it subsequently fell almost to its previous low (from point A to B and then back to C). In contrast, job openings plummeted—much more sharply than unemployment rose—and then failed to recover. In previous recoveries, openings eventually outnumbered job seekers (where a rising blue line crosses a falling green line), but during the last recovery a labor shortage never emerged.