Economists measure labor market tightness as the number of job vacancies per unemployed worker, which is a key factor in monetary policymakers’ decisions.

In the FRED graph above, the blue line shows the seasonally adjusted number of job openings as a fraction of the number of workers in the labor force since January 2020, just before the pandemic. The red line shows the seasonally adjusted unemployment rate. The shaded area shows the onset of the pandemic-related recession, when job postings declined and the unemployment rate jumped to a historically high 15%. But soon after, the unemployment rate declined sharply and job openings became more abundant.

The second graph, below, shows labor market tightness as the ratio of job openings to unemployment. This captures how many job opportunities there are for each person seeking a job. Labor market tightness reached around 2 in early 2022, meaning a very tight labor market with two job openings for each unemployed worker. During this period, many firms faced high demand; as a result, they attempted to hire many workers. Since then, the labor market has cooled significantly, with recent labor market tightness approaching one job for each person seeking a job. This coincides with a general cooldown in demand.

The current labor market is slightly less tight than it was right before the pandemic, though it still remains very tight by historical standards.

How these graphs were created: For the first graph, search FRED for and select “Job Openings: Total Nonfarm (JTSJOR).” From the “Edit Graph” panel, use the “Add Line” tab to search for and select “Unemployment Rate (UNRATE).” Finally, adjust the time series to be from 2020-01-01 to 2024-08-01.
For the second graph, search FRED for and select “Job Openings: Total Nonfarm (JTSJOR).” From the “Edit Graph” panel, go to the “Customize data” field and search for “Unemployment Rate (UNRATE)” and click “Add.” Then, in the “Formula” field type a/b and select “Apply” to obtain the ratio of job openings to the unemployment rate. Finally, adjust the time series to be from 2020-01-01 to 2024-07-01.

Suggested by Mick Dueholm and Serdar Ozkan.