Oregon's Beveridge Curve Shows Less Efficency Finding Jobs

Last Friday, we shared details about summer hiring demand in Oregon. With two quarters of Job Vacancy Survey data in the COVID-19 recession, this seemed a good time to take a look at Oregon's Beveridge Curve.

The Beveridge Curve shows the relationship between the job openings rate (vacancies/labor force) and the unemployment rate. Note the labor force includes all those ages 16+ who are either employed, or out of work but are available and able to take a job if offered to them, and have actively sought work in the past four weeks.

At first glance the Beveridge Curve is just a messy squiggle. That squiggly line does generally tend to move in predictable ways though. When the curve moves up and to the left over time, that means the unemployment rate is low, and there's strong hiring demand relative to the size of the labor force.

The curve gets more interesting if over a longer period of time it moves out to the right and also stays high. This could lend to the narrative that those who are unemployed are not finding jobs as well, when there seem to be plenty of vacancies. 

Oregon doesn't have as long of a series as the Bureau of Labor Statistics (BLS) does for their curve, which actually did shift to the right during the Great Recession, before moving back up and to the left during the last recovery and expansion.

From our quarterly job vacancy series starting point in Oregon (Winter 2013), the BLS and Oregon curves are remarkably similar, and like what you’d expect: lower hiring demand relative to labor force size when the unemployment rate is high, and higher job opening rates when the economy is strong and unemployment is low. In recent months though, Oregon and the U.S. have had high job opening rates relative to their high unemployment rates. 

What does that mean?
Well, it appears that something is out of whack (← technical term) with the labor market. This looks like the type of situation where those who are unemployed are not finding jobs as efficiently, when there seem to be plenty of vacancies. Usually we’d expect the spring 2020 point on the Beveridge Curve to look more like the Winter 2013 point. This spring and summer though, while unemployment remained relatively high, there were also a lot of “help wanted” signs posted on storefronts and online.

Why the relative inefficiency finding jobs?
There are plenty of anecdotes and data points to grab onto around this (none of which paint a complete picture…). Here are a few possible explanations for greater inefficiency, with supplemental data provided where possible.

• People were staying home, mostly on temporary layoff, and not looking for another job if expecting to go back to their current employer. Temporary layoffs accounted for the bulk of COVID-19 job losses, and don't require active job search with other employers to be counted among the unemployed.
  

• Lower-wage earners were more likely to be laid off, meaning those who earn more were more likely to still be employed (and still spending). People who earn more are more likely to still have jobs, and are buying stuff, and a different mix of stuff (e.g., home goods rather than vacations). That kept up the hiring demand to make and/or deliver that stuff, even with higher unemployment. Here's a look at all jobs in Oregon where the person had worked in both 4Q2019 and 1Q2020. Of those jobs, the lower-wage jobs declined by almost double the rate of middle-wage or high-wage jobs. What’s more, of the lower-wage jobs that remained in 2Q2020, the median number of hours worked fell by 19 percent. For the middle- and high-wage jobs, the number of hours remained essentially the same. 

•  The extra $600 in Federal Pandemic Unemployment Compensation for the unemployed bolstered their spending in spring and summer. Many who lost jobs had temporary full wage replacement (or more) through the end of July with the extra $600 from the CARES Act. Research from the Office of Economic Analysis shows total personal income up by 10 percent in April. Research from JP Morgan Chase shows saving and spending trends among unemployed people who have bank accounts with them. It shows spending by the unemployed increased by 22 percent upon receipt of unemployment benefits and declined by 14 percent in August. This would help keep hiring demand up for making and delivering goods and services too. Of course, the extra $600 is three months in the rear view mirror (at least in terms of effective date), and the $300 lost wages assistance is mostly distributed now in Oregon too. It will be interesting to see how things change heading from fall into winter.

• Child care issues: even with heightened teleworking, national data show only about one out of four jobs being teleworked. For those with kids at home, may be looking for work that accommodates summer camp/day care closures and/or distance learning. (Reminder: if someone left or permanently lost a job, and is not available and able to take a job offered to them, or hasn't actively sought work in the past four weeks, they are no longer in the labor force.)
  

• The extra $600 and waived work search requirements for Unemployment Insurance benefits could have been disincentives to search for work while unemployed.

More information about job vacancies in Oregon can be found in the Job Vacancy box on the publications page of QualityInfo.org. You can send questions on Oregon's Beveridge Curve to Gail.K.Krumenauer@oregon.gov.