Posted by: Josh Lehner | September 3, 2015

Job Vacancies and Shadow Unemployment

With headline unemployment back to normal levels and the number of job vacancies at an all-time high, some are increasingly asking the question of where the labor will come from. This was a topic of conversation at our latest forecast release as well.

As the New York Times’ Neil Irwin writes, such conditions generally should and will result in rising wages. Only they have not, at least nationally. George Mason University’s Tyler Cowen adds an important observation that this is not so much about workers vs firms[1], but firms vs firms. In stronger economic times and tighter labor markets, firms must compete on price to attract and retain workers.

Going back to Irwin’s piece, he cites shadow unemployment as a big reason for the lack of wage gains. No surprise here, I agree. Looking at just the official number of unemployed Oregonians shows that there are 2 per job opening in the state. The same ratio seen during the 1990s or the housing boom. However, adding back in the “missing” labor force participants, the ratio is more like 5 to 1 today. Or about halfway back from the depths of the tech recession to the peak of the housing boom.


While the number of jobs available is a good leading indicator and important for economic health, it alone doesn’t tell the whole story. In fact, one could argue a more important gauge is whether or not businesses are having a hard time filling positions, and the reasons why.

The Oregon Employment Department recently released their latest job vacancy survey results and report, written by Gail Krumenauer, senior economic analyst. Gail does a great job of walking the reader through the data in her report. I strongly encourage you to read it, particularly the last couple of pages focusing on the difficult to fill job vacancies and ways to address these issues. When it comes to discussing job openings and available labor, this is the key portion to focus on.

About a third (32%) of the difficult to fill vacancies are things one can reasonably tie directly to workers themselves — lack of qualified candidates, lack of soft or technical skills, or lack of certification. Last year I called these underqualified applicants. However that leaves two-thirds of difficult to fill jobs due to some other reason. Gail highlights some opportunities and challenges around training programs and the like. However some of the reasons jobs are difficult to fill are hard to address. For example, 20% are difficult to fill due to unfavorable working conditions or low wages.

Overall the economy is certainly improving. The labor market is getting tighter and Oregon is seeing wage gains above those in the typical state. However the headline unemployment rate likely overstates any such improvement. Slack remains and there does appear to be available workers for today’s job openings, particularly in the form of shadow unemployment. Even so, one must continue to monitor the difficult to fill jobs for structural issues and ways to address them, if possible.

[1] Of course the worker-firm relationship is important as well. Lower-wage occupations do tend to have higher unemployment rates. Meaning businesses have a larger pool from which to choose. All else being equal, this has an impact on wage growth or lack thereof.


  1. […] as an HR screen during a time when employers were flooded with applicants. Remember, there were 10 or 12 unemployed Oregonians for every job opening. It was clearly a buyer’s market. Downskilling is this process in reverse; employers loosen […]

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