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The job gap is not really that big a deal

The Wall Street Journal reports that there are 11 million unfilled jobs in the United States. That's true enough. But what really matters is how that looks in historical context:

Just before the pandemic started, there were 1.3 million more job openings than there were people to fill them. Then things went crazy, and it was only this year that the job market started to return to normal. Up through summer, the job gap was no worse than it had been in 2019 and early 2020.

In July things started to go south, as employers tried to hire more workers at the same time that workers were getting jobs. The gap is now 2.3 million workers bigger than it was pre-pandemic. There are a couple of things to say about this:

  • It's the right number to use if you really want to know how tight the job market is. Raw numbers are misleading because there are always millions of job openings and millions of unemployed workers. The question is, what does the gap usually look like and how do we compare to that right now?
  • The gap has really opened up only over the past few months. This is not (yet) a long-term problem.
  • The source of this problem is the same as the source of our "supply chain chaos": skyrocketing demand. That's it. With vaccines in hand and the economy fully open, consumer demand has unexpectedly gone way up. The result of this is more orders than our factories can fulfill; more ships than our ports can unload; more need for transportation than our trucking fleet can handle; shortages of goods because people are snapping up everything they can find; and more need for workers than our labor force can provide.

There's really nothing more to it. A sudden and unexpected increase in demand is behind all this. It's not a vast failure of globalization, it's just a temporary spike that will eventually work itself out. Some factories will expand production, some non-workers will be attracted back into the labor force, some prices will go up, savings will return to normal, and demand will stabilize. That's the beauty of the free market and its invisible hand.

Like all matters of faith, even believers sometimes have doubts about this. But don't worry. Things really will work out this time around.

15 thoughts on “The job gap is not really that big a deal

  1. rick_jones

    The gap has really opened up only over the past few months. This is not (yet) a long-term problem.

    It is as close to a vertical plunge as one gets on that chart. A change of 5.1 (or so) million netjobs in the course of less than nine months. While the chart does not go back all that far, it is something which looks unprecedented.

  2. kenalovell

    Watch the media narrative change from 'Jimmy Carter ver.2's economic recovery has stalled' (October 2021) to 'Jimmy Carter ver.2's economy is way overheated' without missing a beat.

    Remember all those sage pundits earnestly asssuring us all through the pandemic that it would be better to do too much stimulus than not enough? They were right then and they are right now. A bout of mild inflation while the job market sorts itself out is a small price to pay for a rapid return to full employment and robust growth.

    1. MontyTheClipArtMongoose

      From the left (jabobin, thenation, intercept, etc.), it will be "Biden economic pitfall, the jobs gap, is clearest marker yet of endstage kapitalism".

      From the right (newsmax, oann, foxnews, facebook, etc.), it will be "just as we warned in runup to 2020 rigged vote, joebiden has unleashed unfettered Soviet deprivation on America with his socialized centrism".

  3. George Salt

    "That's the beauty of the free market and its invisible hand."

    Is Kevin channeling the spirit of Herbert Hoover?

    The hand of the free market is invisible because it's picking your pocket.

    1. MontyTheClipArtMongoose

      The invisible hand only exists because Adam Smith didn't know how to end Wealth of Nations.

      Kind of like how today George R.R. Martin hasn't figured out a way to draw the Winds of Winter to a close.

  4. middleoftheroaddem

    "The job gap is not really that big a deal" depends on what filter one uses. If you think politically, then the job gap (and high inflation) are real issues/problems for Biden's popularity.

    1. lawnorder

      I don't understand why the job gap would be a political problem. There are many more employees than employers, and the employees should love the current seller's labor market. The Democrats should be bragging at every opportunity about all the jobs their policies have created, and about the resulting rising wages. This should be a political opportunity, not a political problem.

      Inflation is another issue, everybody hates inflation. However, if Kevin is right that it's temporary and the inflationary pressures are already easing, it should subside soon enough to be a non-factor in the mid-terms.

  5. ronp

    My leased car was recently stolen, total bummer. I never had such a thing happen before. Hopefully the insurance company will do a full reimbursement (car is actually worth more than when I bought it).

    Anyway, there are few cars out there now and they are marking them up over $1-2K over MSRP. So I will wait for a few months for supplies to increase...

  6. James B. Shearer

    "...A sudden and unexpected increase in demand is behind all this. .."

    The government hands out cash to practically everyone and you get an increase in demand. Who could have predicted that? Well besides Larry Summers.

  7. skeptonomist

    There is also the fact that people are not returning to jobs where they would be exposed to covid. Lots of health-care workers and teachers for example have dropped out because of this. Even if covid continues they may be forced to return if they run out of money.

    1. SecondLook

      ...if covid continues they may be forced to return if they run out of money.

      Or, if they can, adapt to a single-earner household. This may be the case for women with children - the largest demographic in the groups you cited.

      1. lawnorder

        That may become a perverse effect of rising wages. If Dad's income increases, Mom can afford to stay home with the kids. That could mean that rising wages mean a shrinking labor force, putting increased upward pressure on wages, thereby further shrinking the labor force, etc.

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