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Jul

2011

Why Employers Are Slow to Fill Jobs: Business Class - Bloomberg

www.bloomberg.com/...-fill-jobs-business-class.html

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Job Recruitment Economy Unemployment Training

Source: Steven J. Davis, Jason Faberman and John Haltiwanger using data from the Job Openings and Labor Turnover Survey. Recessions, as dated by the NBER.
Bill Clinton put his finger on a distressing aspect of the U.S. jobs situation in a recent television interview. The former president remarked that openings are being filled at only half the rate of previous recessions, even though current unemployment is much higher. He stressed the bleak outlook for job-seeking construction workers and the need for retraining and skills development.

He has a point: Construction workers can't easily become nurses. And, given the weak housing market, an early return of boom times in construction is highly unlikely. So skill mismatch will persist. It slows the pace of job filling by making it harder for employers to find suitable hires.
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- Employers influence the pace of job filling by the intensity of their recruiting efforts. Under an aggressive approach, an employer places help-wanted advertisements, reaches out to attractive candidates and retains professional recruiters. Under a relaxed approach, an employer tends to rely on word of mouth or waits passively for applicants. Employers can also screen candidates quickly or slowly. They can set a high or low bar for experience, qualifications and promise. They can offer more or less attractive compensation packages.
- Jason Faberman, John Haltiwanger and I dug into the innovative Job Openings and Labor Turnover Survey, published by the U.S. Bureau of Labor Statistics. We analysed the data and constructed a new index of recruiting intensity per job vacancy. As seen in the chart above, recruiting intensity per vacancy plummeted during the recession. Despite a modest rebound, recruiting intensity in 2011 remains 20 percent below 2006. Lower recruiting intensity leads directly to a slower pace of job filling.
- Many employers see little downside to passing on marginally qualified applicants when new candidates arrive daily. There is no rush to hire. Anecdotal evidence suggests that some employers see the current situation as an opportunity to upgrade labor quality, hiring only the most outstanding candidates.
- The same concerns about weak sales and an uncertain economic outlook that depress job creation also undercut the desire to fill openings. We live in a time of extraordinary uncertainty about government policy with respect to taxes, health care, financial regulation, monetary issues, environmental regulation, and other areas. The political impasse over the federal debt ceiling further muddles the outlook. Policy uncertainty discourages investment, job creation and hiring.
- Other evidence points to a significant shift in job-seeking behaviour by the unemployed. Government data show that hours of job search per unemployed person fell 15 percent in 2009 from 2008, rebounding only slightly in 2010. Using different data, Alan Krueger and Andreas Mueller conclude that the longer a person is unemployed, the fewer hours per week they devote to the search for a job. This pattern is noteworthy because long-term unemployment is at historic highs. Less search activity by jobless workers is likely to further slow the pace of job filling.