Oregon Office of Economic Analysis

We know job openings are at record levels both nationally and here in Oregon.

The question is why are they so high? At the most basic level the answer is consumer demand is strong and firms are trying to get back to pre-COVID staffing to meet that demand. As simple as that sounds, it’s actually pretty unusual. It’s certainly different than the experiences of the past two recessions which were long-lasting, and had a clear lack of demand. It took years for consumers to return and firms to staff up. Today we know incomes are strong and pent-up demand is very real.

Even as that explanation is concise and sufficient to explain what ‘s going on, I can’t stop there. I’ve been trying to figure out how all the other factors today are impacting job openings. I’m using the accommodation and food service industry as an example below to show how some of these things impact the number of job openings, but this really applies to to all industries.

First, there is considerable amounts of churn in leisure and hospitality. Over the course of a year, roughly 60% of jobs are so-called stable jobs. That means the sector sees 40% turnover. That works out to the average business needing to fill one position every 2 months just due to industry churn and keeping total employment steady. You’ll note that the total job openings in 2019 were larger than this, I think in large part because you don’t advertise fractions of a position! (It could be part-time, but you need a whole person to fill it on a part-time basis). Plus the industry was growing, so needed more workers to expand on top of the churn.

Second, that normal churn is harder to fill today. Quits are up as workers take better opportunities with different firms, meaning there are now more open positions to fill. Plus labor supply is lower, meaning the number of people who would normally cycle into one of those vacant positions over the course of the year is lower as well. That increases openings as it takes longer to fill them. Combined these factors increase job openings by about 65% relative to that normal industry churn. That’s a huge number!

Third, there is the overall employment hole that firms are looking to fill and get all the way back to pre-COVID levels, if not higher. This is an even larger number.

Overall you will see that the current number of job openings are roughly in the same ballpark, or in the middle of those last couple of calculations. It’s clearly not a perfect calculation that scales exactly to what the data tell us, but is indicative and has been helpful for me to think through. The good news is consumer demand is there, allowing the overall economy and firms to try and get back to pre-pandemic levels faster than in recent cycles. And while that clearly is happening, it is challenging in a supply-constrained economy.