An odd puzzle is taking shape in the labor market: Over the past three years, the number of job openings has risen almost 50 percent, but actual hiring has gone up by less than 5 percent. Companies are advertising a lot more jobs, in other words, but not filling them.
To get some sense of how significant this is, consider that if, since June 2010, hiring had risen a third as much as advertised jobs have (rather than only a 10th), and nothing else were different, job creation would be roughly 500,000 higher each month, and the unemployment rate would already be back to normal levels.
So what explains the yawning gap between jobs open and jobs filled?
One possibility is that there is a mismatch between the work that companies need done and the skills that workers have. As Peter Newland of Barclays has said, "We believe that this divergence between openings and hiring is consistent with our view that some of the loss of employment during the recession was structural, rather than purely cyclical, in nature."
Such a structural mismatch may well explain part of the gap, yet it seems unlikely that it explains most of it. After all, job openings in the retail trade have doubled over the past three years, while hiring has been flat. Is it plausible that we lack qualified workers for these jobs?
A second explanation is that employers are offering jobs at wages that are too low to attract good applicants. Alan Krueger, a labor economist at Princeton University who recently stepped down as chairman of President Barack Obama's Council of Economic Advisers, believes this to be an important piece of the puzzle.
Krueger argues that the unemployment rate for those just recently out of work has now returned to roughly pre-crisis levels, and that people who have been out of the labor force for an extended period are exerting little downward pressure on wage rates.
This combination means that, although the long-term unemployed still face a tough road ahead because they are essentially on the margins of the labor market, pressure is growing for higher wages for everyone else.
Under this view, companies have simply not yet adjusted their wage offers. Some support for this perspective comes from experimental data in the jobs survey, which show that the job-offer rate has risen most sharply (relative to hiring) for establishments with 10 to 250 workers. Such small businesses may have more trouble than larger ones in assessing the broader labor market.