Last week the Labor Department offered some seemingly very good news: U.S. employers now have more job openings than ever previously recorded. There is a bounty of opportunities to be had.
And yet to unemployed workers, it may not feel that way.
That’s because many companies are acting like big teases. They say they want to hire, then drag their feet. In fact, the average time required to fill a job opening has also just reached an all-time high: 27.3 days, or almost a month, according to an important and underappreciated monthly data release called the DHI-DFH Mean Vacancy Duration Measure. Firms took about half as long to make a hire in mid-2009. Among the largest firms, this hiring paralysis lasts an almost comical 64 days.
It’s hard to know exactly what explains firms’ seemingly interminable indecision.
One possible explanation relates to so-called “skills mismatch,” the idea that today’s workers simply don’t possess the qualifications necessary for the jobs available. Absent additional training, a recently laid-off construction worker can’t easily fill a nursing slot; a newly idle travel agent is unlikely to pass muster as a software engineer.
Companies themselves are indeed reporting difficulty acquiring talent. Nearly half of small and medium-size businesses with recent vacancies say they could find few or no “qualified applicants,” according to the latest monthly survey of the National Federation of Independent Business. Over the past couple of years, firms have also become increasingly likely to say that “quality of labor” is the “single most important problem” facing their businesses.
I have generally been skeptical of the “skills mismatch” story, mostly because wage growth has been so pitiful during this recovery. If qualified applicants were really so scarce, businesses should be bidding up the salaries of the few hot commodities available. But Steven J. Davis , an economics professor at the University of Chicago’s Booth School of Business and one of the creators of the vacancy duration metric, says it’s unclear how a widespread skills mismatch, if one exists, would actually affect wages. Maybe a shortage of some highly desirable skill would lead employers to bid up the price of that qualification, he says, but that same scarcity might also lead firms to instead settle “for workers who have less of [or] lower-quality versions of the desired skills.” That could, in theory, cause hourly wages to fall overall. Robust research on the connection between skills mismatch and wages is in short supply.
Davis says that it makes sense that vacancy durations are rising as the labor market improves and unemployment shrinks. There are, after all, fewer people pounding the pavement, so it might take more time for firms to find the right candidate. The puzzle is instead why vacancy durations are so much higher than we’ve seen in previous periods with similar levels of unemployment. He says no one knows for sure, but he points to a couple of possible explanations.
One is that innovations in the recruiting process, such as the use of LinkedIn, have made it easier for employers to locate workers who already have jobs and are not actively seeking new positions. For reasons both fair and unfair, candidates who have jobs tend to look much more attractive than those who don’t. It can take time to coax a worker away from another employer.
Second, Davis notes that changes to the legal environment surrounding hiring and retention decisions — some states have eroded “at-will” employment arrangements in ways that can make it harder to shed workers, for example — have encouraged firms to be more cautious about whom they hire. Innovations in screening technology — more involved background checks, personality tests, technical skill assessments, etc. — have meanwhile proliferated. These kinds of hiring hoops are sometimes pitched to firms as tools to make the process more accurate or efficient, but they might also tack on time, especially if a promising candidate fails a test late in the game and a search must begin anew.
For now, in any case, employers can afford to be picky. We’ll see what happens if the recovery strengthens, demand picks up and fallow openings start to feel more like wasted opportunities — for the impatient candidates left cooling their heels and the companies themselves. Hiring at such a leisurely pace might become an unaffordable luxury once work piles up.