Federal Reserve Economic Data

In the most recent FOMC press conference, on June 12, Chair Powell noted that the labor market “has come into better balance, with continued strong job gains and a low unemployment rate.”

One measure of labor market tightness that illustrates this is the job openings-to-unemployment ratio, shown in the FRED graph above. The ratio is taken by dividing the total number of job openings (from the BLS’s Job Openings and Labor Turnover Survey) by the total number of unemployed persons. The result is a statistic of the number of job openings for every unemployed person. This roughly reflects how high employers’ demand is for additional workers relative to the pool of people actively seeking work.

The ratio has clearly come down from its March 2022 peak of 2 job openings per unemployed person. At that time, employers were pining for workers as pent-up consumer demand strained supply chains and contributed to higher prices. But now the ratio is the same as its 2019 average of 1.2. This normalization is partly a result of vacancies being filled by new workers entering the labor force. It is also partly a result of vacancies being eliminated by employers before they’re filled, given the pressure from high borrowing costs and slowing consumer demand.

A few points are also worth noting.

First: Although the ratio of openings to unemployment is the same as in 2019, the ratio’s composition is different. As of May 2024, the number of job openings is higher than its 2019 average—and not only because of population growth. When adjusted for the total demand for workers, there are still more job openings available as shown by the job openings rate.

The current unemployment level is also higher than its 2019 average but so is the unemployment rate. The net effects of relatively more job openings and relatively more unemployed persons essentially cancel each other out, causing the ratio to be the same as it was in 2019.

Second: Based on this measure, labor markets are still tight, much like they were in 2019—a year many economists consider to have been abnormally “hot.” In the 10 years prior, steady payroll growth had cut the unemployment rate to a historic low of 3.7% and job openings almost tripled. Together, these changes lifted the 2019 ratio much higher than the ratio immediately after the 2008 recession or at any other point in the history of the data series. While the unemployment level is now slightly higher than it was several years ago, the recent labor market hasn’t been weak by any historical comparison.

More to consider: The openings-to-unemployment ratio has fallen substantially since January of this year, and job prospects for the unemployed could be reduced further as the economy continues to normalize. This is already playing out as suggested by data on job postings from Indeed.com, which are more recent than the available JOLTS data. (Read more about comparing JOLTS and Indeed data in FRED Blog posts from August and November.)

Also, the labor force may not be able to sustain the growth it has exhibited over the post-pandemic recovery. In fact, it seems to have stalled in recent months. So, as long as employer demand for workers continues to be strong, slowing labor force growth could reduce the competition that job seekers face. If so, the openings-to-unemployment ratio may begin to stabilize around its current level.

How this graph was created: In FRED, search for and select “Job Openings: Total Nonfarm.” From the “Edit Graph” panel, use the “Customize Data” section in the “Edit Line 1” tab to search and select “Unemployment Level.” You should see two series on the “Edit Line 1” tab listed as (a) and (b). In the “Customize Data” section, enter and apply a/b in the formula bar.

Suggested by Charles Gascon and Joseph Martorana.

The FRED Blog recently used research from the St. Louis Fed to discuss how pandemic-related immigration restrictions affected the number of job vacancies per unemployed person—a.k.a., labor market tightness.

Today, we revisit this topic by highlighting research pinpointing the urban centers with the tightest labor markets.

The FRED graph above shows data from Indeed.com, an aggregator of online job listings. Indeed reports job posting activity as a 7-day trailing average, presented as an index with a value of 100 on February 1, 2020. Job postings are highly correlated with job vacancies, and the FRED graph shows persistently elevated levels of job postings (as of May 2023) in three metropolitan statistical areas: Jackson, Mississippi; Omaha-Council Bluffs, Nebraska-Iowa; and Madison, Wisconsin.

Recent research from Cassie Marks, Lowell R. Ricketts, William M. Rodgers III, and Hannah Rubinton at the St. Louis Fed explores tightening in local labor markets during the recovery from the COVID-19-induced recession. Their work specifically identifies the cities of Jackson, Mississippi; Omaha, Nebraska; and Madison, Wisconsin, as the urban centers with the tightest labor markets as of May 2023.

For more about this and other research, visit the website of the Research Division of the Federal Reserve Bank of St. Louis, which offers an array of economic analysis and expertise provided by our staff.

How this graph wase created: Search FRED for and select “Job Postings on Indeed in Jackson, MS (MSA).” From the “Edit Graph” panel, use the “Add Line” tab to search for and add “Job Postings on Indeed in Omaha-Council Bluffs, NE-IA (MSA).” Repeat the last step to add “Job Postings on Indeed in Madison, WI (MSA)” to the graph.

Suggested by Diego Mendez-Carbajo.

The labor force is defined as the people who currently hold a job or are actively seeking a job. A person who is not employed and also is not looking to become employed isn’t considered part of the labor force.

When the pandemic hit in early 2020, businesses closed. A larger-than-usual portion of the labor force was suddenly without work. Some got other jobs, some kept looking, but millions left the labor force. This departure had a multitude of causes, such as early retirement, self-isolation due to the pandemic, taking care of loved ones, or frustration with an unsuccessful job search and continued access to increased federal unemployment benefits.

The FRED graph above shows that the number of people outside the labor force spiked in the spring of 2020. That number declined, as more workers re-entered the labor force over the next year, but the number is still well above what it was before the pandemic.

The red line in the graph is the 5-year trend line from January 2015 to January 2020, which we extended to the current time: More people are still outside the labor force than we would have expected, based on the trend leading up to the pandemic. In fact, there are 2.2 million more people outside the labor force than was expected, which can help explain the current tightness in the labor force.

How this graph was created: On FRED search for “not in labor force” and select the series. Set the start/end dates to January 2015 and 2020. Export the data by clicking “Download.” From your spreadsheet software, calculate a trend line from January 2015 to January 2020. Then go back to the FRED graph and click “Edit Graph.” From the “Add Line” tab, use the “Create user-defined line” to create the red line. Start the line in January 2015 with the value 93510 and end on the present day with a value of 97689. Finally, set the graph to display from 2014.

Suggested by Jack Fuller and Charles Gascon.