Oregon’s Beveridge Curve Shows Unusually High Job Vacancy RateMay 3, 2022
The release of Oregon’s unemployment figures for March, and release of the first 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 appeared to be the situation in Oregon during spring 2020.
In spring 2020, Oregon lost 282,000 nonfarm payroll jobs. 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. In the meantime, temporarily enhanced unemployment benefits amounted, on average, to full wage replacement for unemployed workers.
At the same time, higher-wage earners were more likely to keep their jobs in the downturn. Unemployed or still working, most households also received multiple rounds of direct federal fiscal stimulus. That translated to people continuing to buy goods and services, and a different mix of them (e.g., home goods rather than vacations). That helped keep hiring demand and job openings elevated. Businesses needed to hire workers to make and/or deliver those goods and services, even with higher unemployment.
This combination of temporarily idled workers still tied to an employer, and consumer demand creating the need for workers, would push the Beveridge Curve far to the right. That reflected a period of inefficient movement of unemployed workers to job openings.
A Different Picture Since 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 continued to decline in 2021 and into 2022. Oregon’s unemployment rate dropped to 3.8% in March 2022.
Meanwhile, the number of job vacancies skyrocketed. Hiring demand surpassed its last peak in summer 2017. Both Oregon and the nation have hit the highest level of job openings on record in 2021, and they’ve only dropped slightly off that peak through winter 2022. Unemployment rates have dropped much faster. The U.S. Beveridge Curve looks much like Oregon's.
As a result, the Beveridge Curve and the economic picture look quite different now than during the worst of the pandemic recession. Oregon's unemployment rate has recovered to 3.8%, only slightly above the record low of 3.4% we had for a few months just prior to the pandemic 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 in 2020 is reflected in the dramatic shift of the Beveridge Curve to the left, during what was likely a surge of workers being recalled during the summer and fall of 2020. Unemployment declined significantly, while job vacancies didn't surge 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:
- Consumers keep on spending, which is keeping demand higher for goods and services. Once the income and excess savings of federal stimulus was spent, and inflation started kicking up in the second part of 2021, consumer loans and credit card debts rose again. After dropping from $859 billion in mid-March 2020, consumer loans fell to $741 billion in early 2021. As of mid-April 2022, U.S. consumer loans reached a new peak of $863 billion. Even with higher inflation – or perhaps partly due to it – spending is still increasing. That ongoing demand for goods, services, and travel means employers need to hire more workers to meet that demand, pushing up job openings.
- Nationally and in Oregon, the rate of workers quitting jobs has been relatively high. When more workers quit their jobs, it creates more job vacancies to replace them. Roughly 3% of the workforce has been quitting their job each month for the past year. In accommodation and food services, about 6% of the workforce quit jobs each month for the past year.
- Retirements are starting to tick up 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 retired workers who identified as not in Oregon’s labor force increased by 21% between 2016 and 2019. After remaining relatively flat in 2020, those not in the labor force due to retirement rose by 16,600 (or 2.2%) in 2021.
- There are still some people sitting out the labor force due to COVID-19 concerns. While this has eased considerably over the past year and a half, there remain between 21,000 and 24,000 Oregonians who are out of the labor force and not looking for work due to COVID-19. That’s still a sizeable number of Oregonians sidelined from the labor force. This could include parents working before the pandemic staying home with unvaccinated children under five, or caring for immunocompromised family members, or people staying out of in-person jobs for their own health concern, 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.
- Employers may be doing some "preemptive posting." Oregon employers have reported record difficulty filling job vacancies over the past year. Seven out of 10 job openings were hard to fill at any given time in 2021, and that has persisted into the beginning of 2022. Job openings were also posted for longer periods of time in 2021 due to difficulty filling positions. Given record difficulty hiring, employers may be formally posting more jobs than in the past, or proactively recruiting for upcoming job postings to build candidate pools.
Competitive Hiring Conditions
The Beveridge Curve shows a current labor market dynamic in Oregon that continues to be incredibly competitive for hiring. Both Oregon and the U.S. have more job openings than unemployed workers, even after more than a year of strong hiring. Oregon employers added 122,500 jobs between January 2021 and March 2022. Leading up to the pandemic, it took Oregon 3.5 years to add as many jobs as we’ve gained in the past 15 months. Ongoing consumer demand, rapid hiring pushing down the available labor force, 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.