The discrepancy between unemployment rate and job postings shows an interesting dynamic that is happening in the US labor market

 

The COVID-19 has caused an unprecedented change in the stock market, where the Index has more than doubled within a year period from 2020 March low. The economy, however, is still struggling, as many companies are still struggling to have their business back on track.

 

Likewise, the US labor market is yet to fully recover from the aftermath of COVID-19. The unemployment rate soared to 15% in March 2020 and gradually came down to 5% to 6% range as of 2021 June. Still, the unemployment rate is more than doubled from periods before 2020 when the rate stood less than 3%.

 

US Unemployment rate

Source: U.S. Bureau of Labor Statistics, Unemployment Rate [UNRATE], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/UNRATE, June 18, 2021.

 

Unlike the unemployment rate which still stands quite high, job openings in non-farm and private sector have skyrocketed, surpassing by far the previous records in the last 5 years as the graphs below show.

 

US non-farm job opening

Source: U.S. Bureau of Labor Statistics, Job Openings: Total Nonfarm [JTSJOL], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/JTSJOL, June 18, 2021.

US total private job opening

Source: U.S. Bureau of Labor Statistics, Job Openings: Total Private [JTS1000JOL], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/JTS1000JOL, June 18, 2021.

 

Why is there such a discrepancy, when there are still unemployed people yet companies are finding it hard to hire people?

 

There are plenty of specific reasons, which all relate to what is going on during this post COVID-19 era.

 

  • Plethora of free money: There have been so much stimulus checks and relief grants for all US households that many households do not have incentive to work. When they start working, they will only receive marginally higher salary than relief checks and grants
  • Rise in asset value: Stock, cryptocurrency, real estate and commodity (a.k.a. the everything bubble) had caused people to feel the “Wealth Effect”, where the rise in their assets more than compensate for their lost salary
  • Drop in labor value: Conversely, the value of labor and salary has plummeted because of the unlimited quantitative easing, driving down the value of money (US dollar). This only leads people to believe that hard earned money by labor is less valuable and dis-incentivizes them to look for a job

 

COVID-19 has told people that the rate of capital appreciation significantly outpaces that of labor salary growth, and rendered people less prone to physically work for money.

 

As people are still intoxicated by all the free checks and capital appreciation, will the US labor market be able to come back to the formal self in the post-COVID era?

 

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