Signs Of The Apocalypse: Ratio Of Unemployed To Open Jobs At 5.5 Says BLS

The ranks of the long-term unemployed, those out of work for over 26 weeks, is likely to increase.  In March 2010, 44% of those unemployed were out of work for at least six months, the highest long-term unemployment rate since World War II.

Today, the Bureau of Labor Statistics released its “Job Openings And Labor Turnover” report for February. The number of job seekers for each open position was 5.5. That glut of workers will almost certainly add to the weight of joblessness on the national budget

The situation will cost taxpayers tens of billions of dollars as Congress is likely to extend unemployment and health care programs to support those who are out of work.

According to the Pew Economic Policy Group “over the past five years, federal spending on unemployment insurance has increased five-fold from $33 billion in FY 2005 to an estimated $168 billion in FY 2010, half of which goes towards unemployment benefits beyond the traditional 26 weeks.”

The jobs open report is carefully followed because it is a strong indicator of what unemployment numbers will be in the months ahead. Companies have been terribly careful about new hiring because so many fear that the economic growth that appeared to spike sharply in the fourth quarter will not continue through 2010. This argument has some support already because a significant part of Q4 GDP was based on rebuilding depleted inventories.

US firms have found that they are able to squeeze a remarkable amount of work from their existing labor forces. Worker productivity rose 7.9% in the last quarter of 2009 but real wages with inflation backed out have fallen for four years. Employers have been able to avoid hiring by pushing their current employees harder or relying more on part-time workers.

Until economic activity and corporate sales clearly picks up significantly there is little reason for businesses to risk hiring, particularly because they have done relatively well without adding people. And as long as the number of job openings is so comparatively tiny compared to job seekers, the jobless recovery will stay jobless for months.

Douglas A. McIntyre