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Economist: We might see more job seekers relative to job openings

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Indeed, Chief Economist Jed Kolko joins Yahoo Finance to discuss America’s continued struggles with labor storage, which has resulted in some states announcing an early end of federal UI benefits, causing a temporary surge in job search activity.

Video Transcript

- Let's pick up on one part of that supply shortage, right? Which is labor. And for that, we turn to Jed Kolko. He's Indeed chief economist and Jed has been looking into, as we all have, the conundrum of why people are not going back to work. A number of states have said, well, it's because these guys are getting extra money, and they've taken away that extra money, at least that supplemental unemployment insurance.

Jed, you've been looking into what has happened in terms of hiring and search patterns in those states. And what have you ended up finding?

JED KOLKO: So what we have found on our site at Indeed is that there was a small but temporary increase in search activity in those states that said that they would be opting out of those federal benefits.

Now, that hasn't taken effect yet. Right now about 25 states have announced that they will end those federal benefits starting in mid June. So right now all we're seeing is the effect of the announcement.

Again, a small effect, maybe about a 5% increase in search activity in those states on the day of the announcement relative to what happened nationally. But that effect was gone after about a week.

So people heard that news. It affected search activity a bit, but the real question is to see what happens once those guidelines, those new rules take effect. And the first states in which those take effect will be in mid June.

- Jed, why do you think employers just can't fill these positions? Clearly, there are pools of people out there that need work. Companies are, in fact, stepping up, offering them more money. What is the problem here?

JED KOLKO: I think there are several reasons why employers are having a harder time finding workers than they and many experts expected. Some of the big reasons that have been with us since the beginning of the epidemic is, first of all, many people who are unemployed still think their unemployment is temporary. That is, they still think that they're on a furlough and expect to be called back. Now, many of those people who were temporarily unemployed last year have been called back. But there's still a higher than normal share of unemployment that is temporary.

People are also concerned about the health risks of some in person jobs. Fortunately with vaccinations, those fears should be fading. But that's still a concern for some in person jobs. And, of course, the burden of caregiving with schools and daycares still not fully open in some parts of the country is an added burden, especially on mothers, that is surely holding some people back.

I think the other thing that's a little bit newer, though, is that now that people are getting vaccinated and seeing good news about the economy, people are much more optimistic about the labor market. So there might be some people who are feeling a bit less urgency around taking a job than they might have last summer when there was a lot more uncertainty in the economy, and much more urgency about taking a job if you could find one.

The other thing is now that people are vaccinated, people might be looking forward to visiting family and doing other things that they haven't been able to do for 15 months. And perhaps thinking about starting work a little bit after that.

- Hey, Jed, when we talk about things like child care and vaccination, or health risk concerns still, can you see geographically the trends in that direction. In other words, in places where schools and daycares aren't open, do you see a higher unemployment rate? In places where the vaccination rate is lower, do you see that?

I mean, what kind of empirical evidence can we find to connect the dots here?

JED KOLKO: So at this point it's actually very hard to tease out that empirical evidence, because so many things are happening at the same time. The places where vaccination rates are higher also tend to be places where the industry mix is more skewed toward tech, and finance, and other jobs where people can work from home, and therefore had a different pandemic economy.

So the job mix, the rate of vaccination, and other factors are all correlated. They're all happening at the same time. Same thing when we look at specific sectors. Some of the sectors where unemployment insurance benefits are a higher share relative to wages are also a lot of the same sectors where the in-person health risks might be higher. So even though your instinct's totally right to try to think about which places or which sectors might be more affected, the challenge is that a lot of the places or sectors that might be affected by one of these factors are also affected by other factors. It makes it very hard to disentangle exactly why we're not seeing more hiring right now when there are so many job openings and so many job postings.

- You know, Jed, speaking of difficult to answer questions, and one that I think Wall Street is certainly wrestling with right now is the most basic labor market question, at least as I see it, which is always, is the labor market loose right now? Or is the labor market actually tight right now?

And I think that you look at the unemployed versus Feb 2020, it seems obvious that the labor market is quite loose. But are there signs, in your view, that it's actually a more competitive, a tighter situation perhaps than some of that data might suggest?

JED KOLKO: One of the ways in which this pandemic was so unusual was the huge spike in temporary unemployment, people who were furloughed who expected to get recalled. When you look only at people who definitively lost their jobs, people who became permanently unemployed, the number of permanently unemployed people competing for job openings was actually surprisingly low compared to what we saw in the Great Recession.

So in that sense, during the pandemic, the number of active job seekers per job opening didn't get nearly as high. Did come close to where it was in the Great Recession. And it's fallen back down a bit, starting to look like where it was before the pandemic.

So by that measure when we think about the number of active job seekers, the labor market does look surprisingly tight, even though, again, there are lots of reasons why other people who are not working may not be actively seeking for jobs. Though, that could change come the fall when the kids are back in school, more people are vaccinated, and people have had the chance to take the summer. So we might see more job seekers relative to openings once we get to the fall.

- And Jed, I enjoy your Twitter account. And you recently put out a good chart and a good tweet looking at children still living at home with their parents because of the economic fallout. Do you think the economic recovery for the pandemic will be quality enough that children will be able to leave their parents' home within a year?

JED KOLKO: I think a lot of the things that we saw during the pandemic might turn out to be temporary. There was an increase, of course, in children living with their parents, an increase in people leaving especially expensive neighborhoods in some big coastal metros, like New York and San Francisco.

Some of that might be permanent shifts. But I think a lot of that will turn out to be temporary. This has been such an unusual recession. It affected unusual places. It was much more concentrated in big cities. It affected service industries. There are lots of ways in which the pandemic sped up some changes and slowed down other ones. And I think we'll discover that many of the things that we thought might be permanent effects from the pandemic could turn out to be temporary.

- Well, I guess we were seeing a lot of that over the Memorial Day weekend, weren't we, with a lot of people out and about. Jed Kolko, great to catch up with you. Indeed chief economist. Everybody should check out his Twitter feed, which has a lot of great charts on all of these issues. Thanks again, Jed.