The Job Openings Paradox

One of the great oddities of the current job market is that job openings (as reported by the BLS) and help-wanted online ads (as reported by the Conference Board) have both been on the rise over the past year.  These are usually signs of good labor demand.

However, actual new hires and employment growth have only edged up mildly. In other words, good labor demand has not translated into actual hires.

We can see this most clearly in the business and professional services sector (advertising, law, computer programming, etc). The chart below plots the rate of new hires against the rate of job openings in this industry.

Job openings in business and professional services (the blue line) have soared in recent months. In fact, they are back to 2007 levels. But hiring (the red line) is flat or even trending down.

This is pretty much the pattern across the whole economy. What is going on here? There are three possibilities: Mismatch, offshoring, and lags.  Mismatch says that companies would like to hire, but can’t find the right people. Offshoring says that companies have openings, but they are filling them overseas. Lag would say that companies have openings, but it’s taking them time to pull the trigger, given the overall uncertainty.

I’m going to vote for a combination of offshoring and lag. I’m sure  that some job openings are going overseas. But the statistics also suggest that hiring pressure is building up in some sectors of the economy. If that’s so, 2011 may be a better year for the labor market than people expect.


  1. My experience suggests mismatch is a factor.

    My field is financial technology, which obviously colors my view. In the early 2000’s, I saw a large expansion in hiring in technology. The meme was that everyone was a “technology driven organization”, so technology had both budget and pressure to hire. Later, to some extent before 2007, but made more evident by 2008, there was a cut-back. I realization that quantity over quality was perhaps not the best technology strategy, especially if you cutting back on “flow” (quantity) business in other areas as well.

    Now, the industry is feeling able to expand, but the meme is to be more selective. Hire brains not hands as it were. I don’t mean that as a criticism of the former employees, but as an expression that people are looking to rehire the top quartile of that group. Everyone wants them — so openings are up — but everyone wants that quartile — so hiring is not up as much.

    Perhaps “selective” is a better word than “mismatch”


  1. […] This post was mentioned on Twitter by dnason, Michael Mandel. Michael Mandel said: The job openings paradox–businesses have more job openings, but don't hire. Should we be happy or scared? […]

  2. […] deeper into labor market statistics and sees that the professional and business services companies gearing up to add significantly to their payrolls — even if current hiring trend suggests nothing of the kind. This is pretty […]

  3. […] it’s better than not no demand whatsoever. Here’s additional commentary from economist Mike Mandel: This is pretty much the pattern across the whole economy. What is going on here? There are three […]

  4. […] why have so few new jobs actually been created? In a recent article, Mike Mandel called this “The Job Openings Paradox” and offered three explanations: mismatch, offshoring, and lags. Mandel finds offshoring and […]

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