Job openings and labor turnover: This is the availability of unfilled jobs in the economy. About 90 percent of the openings are private companies, while about 10 percent are government (of which a little more than three-quarters are state and local).
As the economy has recovered, this data series has steadily improved: It bottomed at 2.2 million positions in July 2009, up to the most recent reading in December 2017 of 5.8 million openings. That is a lot of jobs that have not yet been filled.
Job-openings-to-unemployment ratio: This is the big one: We take the number of unemployed people — the folks without jobs but who want one — and compare it with the total number of job openings. (You can play with the data at FRED or BLS.) What this creates is the job-openings-to-unemployment ratio, which is quite revealing about the overall state of the labor market — with big implications for wages, especially in middle- and upper-middle-income employment.
As the crisis came to an end in July 2009, there were 6.6 people looking for work for each available job opening. Competition for jobs was fierce. Employers did not need to compete on wages, benefits, working environment, 401(k) match, stock options, etc. With employees just happy to have a job — any job — there was little upward pressure on wages.
Over the ensuing years, more workers found work and businesses created more new jobs — but not in equal numbers. Although both sides of this ratio saw improvement, they did so at differing rates. Today, there is but 1.1 unemployed person looking for a job for each opening.
This changes the dynamics between employers and new hires. In fact, skilled employee scarcity changes the power so much so that companies have to raise the salaries associated with open positions just to get tenable candidates to apply.
While globalization and technology have kept a cap on wage gains for at least three decades, we might be on the verge of a significant improvement. So long as an imbalance exists between the number of new job openings relative to the number of people looking for work, wages are likely to begin and continue to rise.
We will find out next week whether wage gains are accelerating, when we get a clean Employment Situation report unaffected by hurricanes or seasonal disturbances.
This coluimn was provided by Bloomberg News.