Job Hires Rate Slow to Recover

Rea S. Hederman, Jr.

The job hires rate looks at the number of new employees, whether full-time or part-time, added to a business. The rate is important because it shows how fast businesses are adding new workers to their payrolls.

The higher the rate of hires, the better the job market, which indicates an expanding economy and is a harbinger of higher wage increases. A falling or low hires rate shows a recession or flat economy. The hiring rate and quits rate, tracking voluntary worker departures from companies, are strongly linked; when workers see openings and companies hiring, they are more likely to leave their current jobs to pursue better opportunities.

The hires rate is on the wrong track; even after six straight years of improvement, it remains below the rate during the peak of George W. Bush’s presidency in 2005. The chart shows the slow recovery from the Great Recession, with employers reluctant to add employees at the same rate as the pre-recession level. The good news is that 2016 is on track to be the best year for hires since 2006.

Normally, the hiring rate exceeds the rate of job openings. A high open rate and lower hires rate is a sign that employers are having trouble finding qualified workers. In some industries, the open rate is outpacing the job hires rate, which could indicate a skills mismatch. Such a mismatch occurs when companies have openings but are unable to find workers with the right skills to do the job. Many jobs require more technical skills, and employers may have trouble finding qualified people to fill these positions.

The labor force participation rate is also slow to rebound in this recovery. While some of this is due to demographics, the Congressional Budget Office estimates that government policies like Medicaid expansion reduce the supply of labor.[1] Employers have a smaller pool from which to find employees, so it can take longer to find the right ones. Some businesses report that drug or alcohol abuse can contribute to the difficulty of finding qualified employees.

In the Midwest region, which starts at Ohio’s borders and goes west to Nebraska and the Dakotas, the hires rate has increased steadily, and the region now leads the nation.[2]

Hiring in the Midwest, for example, is almost triple the rate of hiring in the Northeast.[3] The industrial heartland economy is not only strengthening but also diversifying from its older manufacturing base. Some Midwestern states have enacted free market policies like tax and labor reforms that have helped boost the region.

In Ohio, the private-sector labor market has not yet recovered to its pre-recession level, which peaked in 2000. Since that time, private-sector employment growth in Ohio has been near the lowest in the country. Recent reductions in marginal tax rates have encouraged people to work, and the labor market is now growing faster than it has grown in the past several years. From being nearly last, Ohio’s labor market is now close to the national average.

Rea S. Hederman, Jr., is Executive Vice President and Chief Operating Officer of the Buckeye Institute for Public Policy Solutions.


Endnotes

  1. Edward Harris and Shannon Mok, “How the CBO Estimates the Effects of the Affordable Care Act on the Labor Market,” Congressional Budget Office, Working Paper 2015–09, December 2015, 
    http://www.cbo.gov/sites/default/files/114th-congress-2015-2016/workingpaper/51065-ACA_Labor_Market_Effects_WP.pdf (accessed June 9, 2016).
  2. U.S. Department of Labor, Bureau of Labor Statistics, “Job Openings and Labor Turnover Survey News Release,” March 17, 2016, http://www.bls.gov/news.release/archives/jolts_03172016.htm (accessed June 1, 2016).
  3. Kevin Dubina “Job Openings Reach a New High, Hires and Quits Also Increase,” Monthly Labor Review, June 2015, 
    http://www.bls.gov/opub/mlr/2015/article/job-openings-reach-a-new-high-hires-and-quits-also-increase.htm
     (accessed June 1, 2016).



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