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Job Openings Pop, Not Actual Hiring In Labor Puzzle

Job openings have risen far faster than hiring since the recession ended. But does that mean businesses are not finding the right workers or are still not confident enough to fill vacancies

From June 2009 to December 2012, posted openings climbed 51%, but actual hiring rose just 14%, according to the Labor Department's most recent labor turnover data.

The total number of people hired still exceeds posted openings. But the disparity between the rate of increase in openings and hiring is feeding a debate on whether the job market is suffering from low labor demand, which might be addressed with monetary policy, or a long-term skills deficit, which can't.

A structural skills mismatch would imply a higher "natural" unemployment rate, meaning continued stimulus efforts meant to further lower it would stoke inflation.

Explaining the sluggish hiring is complicated by other possible factors: Extended unemployment benefits let recipients be choosier.

The large jobless pool allows businesses to be choosier.

Employers don't want to hire the long-term unemployed.

Firms are collecting resumes until they are more confident in the economy.

The evidence for different arguments is mixed, said Keith Hall, senior research fellow at George Mason University's Mercatus Center and a former Bureau of Labor Statistics commissioner.

"It's been confusing," he said. "This is uncharted territory.

Technological advances could be contributing to skills mismatches, especially in areas like software development and high-tech manufacturing.

The historically low labor force participation rate masks what would otherwise be an unemployment rate above 10% — vs. January's official 7.9% — adding to signs of a permanent shift.

But Hall isn't yet convinced there is a structural gap, and points instead to slow economic expansion. Hiring is decent considering GDP growth from Q4 2011 to Q4 2012 was only 1.5%, he said.

Among small businesses, about one-third report finding few or no qualified job applicants, according to the January survey from the National Federation of Independent Business.

While the 34% who answered that way is up from a post-recession low of 21%, it is comparable to rates seen about 10 years ago.

But a 2011 study from Deloitte found that 67% of manufacturers reported a moderate to severe shortage in qualified workers, with the worst gaps in engineering and skilled production.

Manufacturers ranked problem-solving skills as the most serious shortage, followed by training, work ethic, technology/computer skills, math and reading/writing.

A high school education is no longer enough for many production jobs, but manufacturers have been slow to find ways to develop talent, such as expanding apprenticeship programs, said Sophia Koropeckyj, a managing director for Moody's Analytics.

Some especially hard-hit states are experiencing skill shortages. In places like Florida, homebuilders are having trouble finding qualified workers, many of whom may have left the state, she noted.

But business surveys she has seen point to low demand for labor as the biggest factor in the disparity between the improvement in hiring and openings.

"The demand component is really the most important one," Koropeckyj said.

Besides sluggish hiring, quitting too remains well below pre-recession levels, suggesting workers continue to see few opportunities.