A recession might just eat some of the 11.5 million job openings, labor shortages, other shortages and not create much unemployment

A soft landing, cushioned by excesses, for an economy gone mad.

By Wolf Richter for WOLF STREET.

The number of job openings jumped further into the astronomical zone, reaching a record 11.55 million (seasonally adjusted) at the end of March, up 36% from a year ago . Compared to March 2019, vacancies increased by 57%; it’s 4.2 million After job offers in March 2022 than before the pandemic.

These data are not based on job postings, but based on a monthly survey of 21,000 nonfarm businesses and government entities by the Bureau of Labor Statistics. The survey asks employers about their real needs in terms of employment, hires and terminations.

What this shows is that employers are poaching workers from other employers because they cannot find enough unemployed people willing to fill those jobs, and in order to poach a worker from another employer, they have to offer better wages, benefits and working conditions – driving up labor costs across the economy. And by poaching a worker, they create a new job opening at the previous employer, for a lot of churn.

This historically tight labor market has featured prominently in recent comments from Fed Chairman Powell in preparing markets for rate hikes and a QT coming much faster than expected a year ago.

Even the best paid jobs do not find takers.

In professional and business servicesjob postings reached a record 2.14 million, up 35% from March 2021 and 61% from March 2019.

This category has now become the largest in terms of job postings and includes high-paying jobs as classified under the North American Industry Classification System (NAICS): Professional, Scientific and Technical Services (NAICS 54), Management of Companies and Enterprises (NAICS 55), Administrative and Support Services, and Waste Management and Remediation Services (NAICS 56).

Health and social assistance is now the second largest category in terms of job openings – an industry that is plagued by shortages of nurses and doctors. Job postings in March fell slightly from February’s record, to 2.03 million, up 48% from a year ago and 62% from March 2019:

In leisure and hospitalitythe third-largest category, job vacancies have fallen further from last December’s peak of 1.67 million, but remain desperately high, up 51% from a year ago and 64% compared to March 2019:

In retailthe fourth largest category, job postings reached a new record high of 1.29 million, up 34% from a year ago and 70% from March 2019!

Poaching of workers from other employers.

When an employer hires a worker from another employer, or when an employee leaves one employer to find work with another employer, the former employer signals a “resignation” and must now fill that position. There are myriad stories of why people leave one job to take another, and it usually boils down to better pay, benefits, and working conditions, as well as extraneous reasons like shorter commutes. , cheaper housing, etc.

Especially in the higher-paying categories, such as professional and business services and healthcare, recruiters are constantly trying to chase down candidates they can attract to a new job. Workers’ inboxes are full of these efforts.

Thus, the number of “quits” reached another record, at 4.54 million workers who voluntarily left their jobs in March, up 23% from a year ago and 29% from March 2019. Resignations are a sign of workforce churn, and this is the mechanism by which wage increases spread through the economy:

Of course, age discrimination persists. A 35-year-old tech boss doesn’t want to hire a 60-year-old worker, no matter how skilled. It’s like that. Of course, there are some exceptions that are discussed, but the reality is that age discrimination is a fact of life, and even a massive labor shortage cannot overcome age aversion. a 35-year-old tech boss to hire a 60-year-old man. former tech boss.

Hiring, thanks to quits and turnover, was also brisk, with 6.33 million people hired and hired by other employers, up 9% from a year ago and 19% from compared to March 2019:

Going into recession with this overwhelmed labor market and shortages?

The Fed, after denying it, then procrastinating for too long and making one policy mistake after another at every step, has finally embarked on its efforts that are too little too late to rein in this raging inflation that is out of control and spread through the US economy, and ignited globally.

The Fed will tighten its monetary policies to curb unregulated demand, which will reduce inflationary pressures. And given the huge demand and inflation out of control, the Fed will have to tighten a lot, and that will probably cause a recession – and it should because that’s what this broken economy with all its shortages needs to allow everyone to catch.

A recession is marked by a decline in demand from the previous quarter, for a few quarters in a row. It’s part of the business cycle. This is usually accompanied by job loss.

But with 11.5 million vacancies currently unoccupied, employers who no longer find enough workers will see demand fall by a certain amount, and first they will reduce their vacancies, and together they will remove millions of job postings, and this will only bring them back to normal.

And employers who are hit harder by a drop in demand may not only stop looking to fill vacancies, but may also lay off some people. But there is still strong demand for labor elsewhere, given the millions of job openings that persist at this point, and many laid-off workers will likely be able to find jobs elsewhere as the turnover continues. .

The United States never entered a recession with this number of excess job offers and these still large-scale shortages. What if there’s a big drop in demand that mostly eliminates 5 million job postings and brings job postings back to normal, with little actual job loss, and that eliminates shortages and drives down demand where everyone can catch up and bring the economy into balance with supply?

It could still be considered a recession, but it would be a soft landing – tempered by the huge cushion of those 11.5 million job creations, the backlogs and shortages that still linger in the economy. Even semiconductor manufacturers could finally catch up with demand.

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