Oregon’s Beveridge Curve Shows Unusually High Job Vacancy RateJuly 21, 2021 The release of Oregon’s unemployment figures for June, and release of the second quarter job vacancy results, make for a good opportunity to check in on the state’s Beveridge Curve. The Beveridge Curve shows the relationship between the job openings rate (vacancies/labor force) and the unemployment rate. Note the labor force includes all those ages 16+ who are either employed, or out of work but are available and able to take a job if offered to them, and have actively sought work in the past four weeks. So, the Beveridge Curve shows the number of job opportunities relative to the available workforce that’s typically looking for a job.
Interpreting the Spring 2020 Inefficiency
At first glance the Beveridge Curve is just a messy squiggle. That squiggly line does generally tend to move in predictable ways though. When it moves down and to the right, unemployment is high, and there aren’t many available job opportunities. If it moves out to the right, but stays high, this could mean those who are unemployed are not finding jobs as well, when there seem to be plenty of vacancies. That appears to be the situation in Oregon during spring 2020.
In spring 2020, about nine out of 10 layoffs at the beginning of the pandemic recession were temporary. Those workers probably expected to get called back to work by their employer once businesses could resume operations, and weren't likely to be seeking another job.
At the same time, higher-wage earners were more likely to keep their jobs in the downturn, and most households received direct federal fiscal stimulus. That translated to people continuing to buy stuff, and a different mix of stuff (e.g., home goods rather than vacations). That helped keep up the hiring demand to make and/or deliver that stuff, even with higher unemployment.
This combination of temporarily idled workers still tied to an employer, and consumer demand creating the need for workers pushed the Beveridge Curve far to the right. That reflected a period of inefficient movement of unemployed workers to job openings.
A Different Picture in Spring 2021
When the Beveridge Curve moves up and to the left over time, that means the unemployment rate is low, and there's strong hiring demand relative to the size of the labor force. This appears to be the situation in Oregon during spring 2021. After a pause in both aspects of the Beveridge Curve over the winter – and an economic "freeze" period in Oregon – unemployment has continued to decline in 2021. Oregon’s unemployment rate dropped to 5.6% in June.
Meanwhile, the number of job vacancies skyrocketed. Hiring demand has surpassed its last peak in summer 2017. Both Oregon and the nation have recently hit the highest level of job openings on record, while the unemployment rate is relatively low. The U.S. Beveridge Curve looks much like Oregon's.
As a result, the Beveridge Curve and the economic picture look quite different just one year after the worst of the pandemic recession. Oregon's unemployment rate has recovered about five times faster during this recovery than it did following the onset of the Great Recession. We closed many otherwise thriving businesses for public health and safety, to prevent the spread of COVID-19. The first wave of re-opening shows in the dramatic shift of the Beveridge Curve to the left, during what was likely a surge of recalls during the summer and fall of 2020. Unemployment declined significantly before the spring 2021 surge in job vacancies relative to the labor force.
Potential Reasons for Record Job Vacancy Rate
There are likely many factors at play – at the same time – and it’s hard to tell just how much to attribute to each one. Some of these factors include:
- There are still some people sitting out the labor force due to COVID-19 concerns. While this has eased from 45,000 in the winter of 2021 down to 32,500 in spring 2021, that's still a sizeable number of Oregonians sidelined from the labor force. This could include parents working before the pandemic staying home with children until in-person school starts up this fall, the immunocompromised staying out of in-person jobs, among others. The result of these would-be workers staying out of the labor force is that it reduces available labor for employers, and shifts the Beveridge Curve a little further to the left than it would otherwise be.
- There's a lot of pent-up demand to get out, and a lot of pent up savings, including federal stimulus that went to households throughout 2020 and in spring 2021. The Oregon Office of Economic Analysis cites $2.5 trillion in excess savings in Oregon, mostly in bank accounts. Excess savings fuels additional demand for goods, services, and travel. That means employers need to hire more workers to meet that demand, pushing up job openings.
- Nationally, we know that the quits rate has recently been at a record high. When more workers quit their jobs, it creates more job vacancies to replace them.
- Retirements are likely on the upswing again. As with quits, when someone retires, it creates a replacement opening, and also means one less person in the labor force looking for work. The number of workers who identified as not in Oregon’s labor force increased by 21% between 2016 and 2019. After taking a pause in 2020, those retirements are expected to resume again in 2021.
- Employers may be doing some "preemptive posting." In spring 2021, Oregon employers reported difficulty filling 71% of their job openings. That’s the highest share reported in the eight-year history of the Oregon Job Vacancy Survey. Given record difficulty hiring, employers may be proactively recruiting for upcoming job postings to build candidate pools.
- What about enhanced unemployment benefits? We know that so far in 2021, on average, regular unemployment benefits were full wage replacement for claimants relative to their pre-pandemic earnings on the job. That said, the number of people receiving any type of unemployment benefits in Oregon dropped by 30% from January to June. In addition, preliminary research from the University of Massachusetts-Amherst shows no employment gains in the weeks immediately following the premature end of enhanced unemployment benefits for states that stopped those programs. Oregon’s resumption of job search registration and upcoming re-implementation of active work search requirements in July should diminish any remaining labor force disincentives related to benefits.
The Beveridge Curve shows a current labor market dynamic in Oregon that continues to be incredibly competitive for hiring. Employers have already added 57,800 jobs in the first half of this year. Leading up to the pandemic, it took Oregon 22 months to add about that many jobs. Rapid hiring, and factors either holding or moving some workers out of the labor force are contributing to ongoing labor shortages.
More information about Oregon's job vacancy survey is available at Qualityinfo.org/pubs.