There are still 1.4 million more jobs than unemployed people, but the gap is closing

Job openings edged lower in June as the labor market continues to tighten, the Labor Department reported Tuesday.

Employment vacancies fell to 7.35 million from 7.38 million in May, according to the Job Openings and Labor Turnover Survey. The so-called JOLTS report is closely watched by Federal Reserve policymakers as a measure for slack in the labor market. 

The change in job openings left the gap between vacancies and those considered unemployed at 1.37 million, a decrease of 123,000 from May. Unemployed workers are defined as those out of work who’ve looked for a job and are available for hire. Trade, transportation and utilities vacancies stood at 1.4 million, while education and health services and professional and business services were close behind with about 1.3 million each. 

The amount of quits, considered an indicator of labor market mobility is it measures employees who voluntarily left their jobs, declined by 55,000 to 3.43 million. That left the quits rate among total workers unchanged at 2.3%, where it has remained through the year.

With the jobless rate at 3.6% in July, questions have persisted how close the U.S. is to full employment. The huge gap between jobs and the unemployed suggests more room for movement given a skills gap between what employers want and what the labor market is offering.

For 22-year old Andre Bezo, the offer of a job training program that put him on the IT staff at Stanford University was enough to get him to put community college aside for a while as he received a hands-on opportunity to further his career.

Bezo, of San Mateo, California, was working at fast-food restaurant when a former manager told him about the program known as Year Up Bay Area that serves low-income youth without college degrees. He’s now working in a Level 1 position at Stanford’s Service Desk.

“The sudden transition has been motivating and reignited my passion to better myself,” he said.

Market’s changing dynamics

At a time when college students are swimming in $1.5 trillion of debt, the chance to learn an advanced skill and get paid for it appealed to Bezo, who lives at home and is helping support his family.

“The perspective today is really shifting, because everyone is wondering whether college is necessary to be that jumping off platform for your professional career,” he said. “The jobs market is there, there are positions available. There are people looking for new, young talent that might be able to motivate themselves.”

It’s not only job seekers who are changing. Employers also are adapting to the labor market’s shifting dynamics.

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Employees use hand tools to assemble components of a LEAP jet engine at the General Electric Aviation plant in Lafayette, Indiana, July 19, 2019. Luke Sharrett | Bloomberg | Getty Images

Job training has become a priority as companies have taken to hiring workers who may not have the skills at hand but are capable of adapting and learning.

The skills gap also is helping keep wage growth down. Average hourly earnings rose 3.2% year-over-year in July, around the best levels of the recovery but still a fairly tepid case.

Another dynamic in the conundrum over stubborn wage gains at play is that new hires are not focusing as much on pay.

“Salary is becoming less and less of a priority for candidates,” said Irina Novoselsky, CEO of the CareerBuilder jobs site. “As a result, they’re not pushing that as much. They’re asking more about benefits, what the brand stands for, who their boss is. Over 60% are changing jobs because of their boss, and they’re willing to take a pay cut.”

There are wage gains, Novoselsky said, but they’re primarily happening on the extremes of the scale — either on the lower or higher end, but not much in the middle.

“We’re continuing to see really high turnover,” she said. “Candidates are continuing to shop around. It only increases the pressure on the tight labor market.”

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