Central Oregon’s Tight Labor Market and the End of Expanded Unemployment Insurance BenefitsOctober 1, 2021 Over the past six months, the labor market has become increasingly tight across Central Oregon, with many employers finding it difficult to fill job vacancies. Labor market conditions are based on the relationship between the supply of labor and the demand for labor in a particular place and time. An abundant supply of workers with little demand? It likely means that we are in a recession with little economic growth. A low supply of workers with high demand? That usually means the economy is expanding. These are two ends of the spectrum, but the key is understanding that labor market conditions are determined by the relationship between these two variables.
We have a relatively uncommon labor supply to demand relationship today. The supply of labor as measured by unemployed workers is up while the demand for labor as measured by job ads is also up. In our case the demand side is up by a significantly larger margin that the supply. In August, there were around 2,700 more unemployed workers in Central Oregon than before the pandemic (+66%). That would seem like an abundant supply of workers for businesses to hire. Yet, job ads are up by around 2,200 (+112%) compared with pre-pandemic levels.
Taking these two variables together, in August there were 1.7 unemployed workers in Central Oregon per job ad. Before the pandemic it was around 2.2 unemployed per job ad. The last time the ratio was this tight was in 2015 and 2016 as the region’s employment exploded coming out of the Great Recession. However, back in 2015/2016 we got to that ratio of unemployed per job ad by different means. We had fewer unemployed back then, but also fewer job ads.
Many have been anticipating (and hoping for) a wave of applicants for these job ads across the region as the expanded unemployment insurance benefits through the CARES Act and other federal legislation expire. Those extended and expanded benefits expired on September 5. Will the loss of those benefits lead to a notable increase in job seekers?
In total, 3,816 Central Oregon workers lost their federal unemployment insurance benefits in early September. That represents roughly 56% of the 6,830 total unemployed workers across Central Oregon. There were roughly 4,050 job ads in August. That means that if every one of those 3,816 workers who lost their federal UI benefits got matched to one of these jobs, we could fill nearly every job. That sounds great; however, there is likely some degree of mismatch between the skills of those 3,816 workers and the skills demanded by those 4,050 jobs.
Another problem is that 1,640 of those 3,816 workers losing UI benefits (43%) are Pandemic Unemployment Assistance (PUA) claimants. These are mostly self-employed or gig economy workers. Before becoming unemployed, most of these workers were not payroll employees who worked for an employer. It is unlikely that many of these workers are going to transition to payroll work now that their self-employed unemployment insurance benefits expired.
In reality, we likely have roughly 2,200-2,500 workers losing their federal UI benefits who will be looking for a payroll job. In a hypothetical situation where all of those non-self-employed workers found work this month and the number of job ads dropped by a corresponding 2,200 we would see some improvement to the labor market. However, that improvement would be pretty marginal. Our ratio of unemployed workers per job ad would go from 1.7 to 2.5. That is roughly the same ratio as we saw in most of 2019, a period when the region’s labor market was also tight.
Unfortunately, there is another problem. We don’t know how many of those workers who lost their benefits are going to drop out of the labor market due to child care concerns, retirement, COVID concerns, etc. This reduces the 2,200 potential job seekers by an unknown, but likely not insignificant, amount.
Where does this leave us? The increased number of job seekers resulting from the expiration of expanded federal UI benefits will marginally help the labor market. We will likely go from a historically tight labor market to one that remains tight, but relatively more stable with fewer quits. The more realistic scenario to alleviate labor tightness in the next six to 12 months is less demand for workers. We will likely see some degree of seasonal decline in job ads as we move into fall and winter. There is also some hope that once businesses rehire laid off workers, consumer spending slows, and quits slow, we will see our historic rate of jobs ads drop to a more typical level.