Ratio Of Job Seekers To Job Openings Slips Below 3-To-1 For First Time in Nearly Five Years, But Is Still As High As In Worst Month Of Early 2000s Downturn (Demo)

On October 24, 2013, Heidi Shierholz writes on EconomicPolicyInstitute.org:

The Job Openings and Labor Turnover Survey (JOLTS) data released this morning by the Bureau of Labor Statistics showed that the total number of job openings increased by 75,000 in August. That, along with the upward revision of 119,000 job openings to earlier data, brought the August level of job openings to 3.9 million. However, there were 11.3 million job seekers in August (unemployment data are from the Current Population Survey and can be found here). That means there were 2.9 job seekers for every job opening in August. In other words, for nearly two out of every three job seekers, there simply were no jobs.

August was the first time in nearly five years that the ratio of job seekers to job openings fell below 3.0-to-1, but the level is still extremely high. To put today’s ratio of 2.9-to-1 in perspective, it matches the highest the ratio ever got in the early 2000s downturn (the ratio stood at 2.9-to-1 in September 2003). In a labor market with strong job opportunities, the ratio would be close to 1-to-1, as it was in December 2000 (when it was 1.1-to-1).

Furthermore, the improvement in the ratio of job seekers to job openings in this recovery overstates the improvement in job opportunities. Most of the decline in the number of job seekers is because more than 5 millionwould-be workers are sidelined; they are neither employed nor looking for work due to the weak labor market. These “missing workers” are thus not counted as unemployed, but many will become job seekers when a robust jobs recovery finally begins, so job openings will be needed for them, too.

Figure A shows the number of unemployed workers and the number of job openings by industry. This figure is extremely useful for diagnosing what’s behind our sustained high unemployment. If our current elevated unemployment were due to skills shortages or mismatches, we would expect to find some sectors where there are more unemployed workers than job openings, and some where there are more job openings than unemployed workers. What we find, however, is that unemployed workers dramatically outnumber job openings across the board. There are between 1.3 and 9.8 times as many unemployed workers as job openings in every industry. In other words, even in the industry with the most favorable ratio of unemployed workers to job openings (finance and insurance), there are still 30 percent more unemployed workers than job openings. In no industry does the number of job openings even come close to the number of people looking for work. This demonstrates that the main problem in the labor market is a broad-based lack of demand for workers—not, as is often claimed, available workers lacking the skills needed for the sectors with job openings.

The JOLTS data are a regular reminder that there is always a great deal of “churn” in the labor market. When we learn, as we did last Friday, that the labor market added 148,000 jobs in September, it is important to remember that this is a net change, which masks a lot of shuffling. Over the last year, an average of 4.4 million workers were hired every month, and an average of 4.2 million workers either left their jobs voluntarily or were laid off every month. These hires and separations numbers, however, are currently very low; when the labor market is stronger, there is much more churn. For example, in 2006 and 2007, there were 5.3 million people being hired and 5.1 million people separating from their jobs (i.e., leaving their jobs or being fired) each month on average. The reason there is less churn today is that job opportunities are so scarce that employed workers are much less likely to quit the job they have. In 2006 and 2007, nearly 3 million workers voluntarily quit their jobs each month. That dropped to a low of 1.6 million in September 2009. It has since increased somewhat, but is still extremely low. In August, 2.4 million workers voluntarily quit their jobs, a slight increase (22,000) from July. Because leaving a job for a better opportunity can be an important way for workers to advance, this persistent depressed rate of voluntary quits represents millions of lost opportunities. 

One of the best ways to judge the relative strength of job opportunities over time is to examine the trend in the number of hires. The number of hires was basically unchanged (declining by 9,000) in August. Figure Bshows the total number of hires each month over time. It fell dramatically in the Great Recession, saw some very modest improvement between the middle of 2009 and early 2012, but has made no sustained improvement over the last year and a half, since February 2012.

The employment down turn trends should surprise no one who is conscious and who has even causally observed the constant shift to non-human productive inputs in the manufacturing, distribution, and sales of products, as well as the delivery of services, that has been occurring during their lifetime. The first burst of this phenomena was the Industrial Revolution. But now we are in an age of technology sophistication that is permeating every sector of industry and our day-to-day lives.

There’s nothing new about machines replacing people, but the rate of replacement is exponential and the result is that productivity gains lead to more wealth for the OWNERS of the non-human factor of production, but for others who have always been dependent on jobs as their source of income, there has been a steady decline to poverty-level labor incomes.

What must be understood (which unfortunately is not understood by conventional economists) is that there are two independent factors of production––human or labor workers and non-human or physical productive capital––productive land, structures, machines, super-automation, robotics, digital computerized operations, etc.

Fundamentally, economic value is created through human and non-human contributions.

Also what needs to be understood is that human productivity has not advanced (our human abilities are limited by physical strength and brain power––and relatively constant), but that the productiveness of the non-human factor of production––productive capital––is the reason that private sector corporations, majority owned by the “1 percent,” are utilizing the non-human factor of production increasingly to create efficiencies and save labor costs. It is the function of technology to save labor from toil and to enable us to do things that otherwise is humanly impossible without non-human input.

The critical question becomes who should own productive capital? The issue of OWNERSHIP is unbelievably overlooked by those in academia and politics, as well as by the author of the MIT Technology Review article. Yet we live in country founded upon private property rights.

Today, large streams of data, coupled with statistical analysis and sophisticated algorithms, are rapidly gaining importance in almost every field of science, politics, journalism, and much more. What does this mean for the future of work?

But what about China, the place where all the manufacturing jobs are supposedly going? True, China has added manufacturing jobs over the past 15 years. But now it is beginning its shift to super-robotic automation. Foxconn, which manufactures the iPhone and many other consumer electronics and is China’s largest private employer, has plans to install over a million manufacturing robots within three years. Thus, in reality off-shoring of manufacturing will eventually be replaced by human-intelligent super-robotic automation.

The pursuit for lower and lower cost production that relies on slave wage labor will eventually run out of places to chase. Eventually, “rich” countries, whose productive capital capability is owned by its citizens, will be forced to “re-shore” manufacturing capacity, and result in ever-cheaper robotic manufacturing.

“The era we’re in is one in which the scope of tasks that can be automated is increasing rapidly, and in areas where we used to think those were our best skills, things that require thinking,” says David Autor, a labor economist at Massachusetts Institute of Technology.

Businesses are spending more on technology now because they spent so little during the recession. Yet total capital expenditures are still barely running ahead of replacement costs. “Most of the investment we’re seeing is simply replacing worn-out stuff,” says economist Paul Ashworth of Capital Economics.

Yet, while the problem is one that no one can no longer ignore, the solution also is one starring them in the face but they just can’t see the simplicity of it.

The fundamental challenge to be solved is how do we reinvent and redesign our economic institutions to keep pace with job destroying and devaluing technological innovation and invention so not all of the benefits of owning FUTURE productive capacity accrues to today’s wealthy 1 percent ownership class, and ownership is broadened so that EVERY American earns income through stock ownership dividends so they can afford to purchase the products and services produced by the economy.

None of this is new from a macro-economic viewpoint as productive capital is increasingly the source of the world’s economic growth. The role of physical productive capital is to do ever more of the work of producing more products and services, which produces income to its owners. Full employment is not an objective of businesses. Companies strive to keep labor input and other costs at a minimum. Private sector job creation in numbers that match the pool of people willing and able to work is constantly being eroded by physical productive capital’s ever increasing role. Over the past century there has been an ever-accelerating shift to productive capital––which reflects tectonic shifts in the technologies of production. The mixture of labor worker input and capital worker input has been rapidly changing at an exponential rate of increase for over 235 years in step with the Industrial Revolution (starting in 1776) and had even been changing long before that with man’s discovery of the first tools, but at a much slower rate. Up until the close of the nineteenth century, the United States remained a working democracy, with the production of products and services dependent on labor worker input. When the American Industrial Revolution began and subsequent technological advance amplified the productive power of non-human capital, plutocratic finance channeled its ownership into fewer and fewer hands, as we continue to witness today with government by the wealthy evidenced at all levels.

People invented tools to reduce toil, enable otherwise impossible production, create new highly automated industries, and significantly change the way in which products and services are produced from labor intensive to capital intensive––the core function of technological invention. Binary economist Louis Kelso attributed most changes in the productive capacity of the world since the beginning of the Industrial Revolution to technological improvements in our capital assets, and a relatively diminishing proportion to human labor. Capital, in Kelso’s terms, does not “enhance” labor productivity (labor’s ability to produce economic goods). In fact, the opposite is true. It makes many forms of labor unnecessary. Because of this undeniable fact, Kelso asserted that, “free-market forces no longer establish the ‘value’ of labor. Instead, the price of labor is artificially elevated by government through minimum wage legislation, overtime laws, and collective bargaining legislation or by government employment and government subsidization of private employment solely to increase consumer income.”

Furthermore, according to Kelso, productive capital is increasingly the source of the world’s economic growth and, therefore, should become the source of added property ownership incomes for all. Kelso postulated that if both labor and capital are interdependent factors of production, and if capital’s proportionate contributions are increasing relative to that of labor, then equality of opportunity and economic justice demands that the right to property (and access to the means of acquiring and possessing property) must in justice be extended to all. Yet, sadly, the American people and its leaders still pretend to believe that labor is becoming more productive.

The 400 wealthiest Americans and the other 1 to 10 percent richest Americans are rich because they own wealth-creating, income-generating productive capital assets. The disenfranchised poor and working and middle class are propertyless in terms of owning productive capital assets.

Because productive capital is increasingly the source of the world’s economic growth, shouldn’t we be asking the question why is not productive capital the source of added property ownership incomes for all? Why are we not addressing how the system facilitates greed capitalism and envy while concentrating productive capital ownership among the 1 to 10 percent of the population?

The change that is necessary is to reform the system to provide equal opportunity for EVERY American to acquire wealth-creating, income-generating productive capital assets on the basis that the investments will pay for themselves––and on the same terms that the wealthy ownership class now utilizes. They are able to use the investment’s earnings to pay off the capital credit loans used to finance their investments, without having to use their own money or deny themselves consumption.

A National Right To Capital Ownership Bill that restores the American dream should be advocated by the progressive movement, which addresses the reality of Americans facing job opportunity deterioration and devaluation due to tectonic shifts in the technologies of production.

There is a solution, which will result in double-digit economic growth and simultaneously broaden private, individual ownership so that EVERY American’s income significantly grows, providing the means to support themselves and their families with an affluent lifestyle. The Just Third Way Master Plan for America’s future is published at http://foreconomicjustice.org/?p=5797.

The solution is obvious but our leaders, academia, conventional economist and the media are oblivious to the necessity to broaden ownership in the new capital formation of the future simultaneously with the growth of the economy, which then becomes self-propelled as increasingly more Americans accumulate ownership shares and earn a new source of dividend income derived from their capital ownership in the “machines” that are replacing them or devaluing their labor value.

The solution will require the reform of the Federal Reserve Bank to create new owners of future productive capital investment in businesses simultaneously with the growth of the economy. The solution to broadening private, individual ownership of America’s future capital wealth requires that the Federal Reserve stop monetizing unproductive debt, including bailouts of banks “too big to fail” and Wall Street derivatives speculators, and begin creating an asset-backed currency that could enable every man, woman and child to establish a Capital Homestead Account or “CHA” (a super-IRA or asset tax-shelter for citizens) at their local bank to acquire a growing dividend-bearing stock portfolio to supplement their incomes from work and all other sources of income. Policies need to insert American citizens into the low or no-interest investment money loop to enable non- and undercapitalized Americans, including the working class and poor, to build wealth and become “customers with money.” The proposed Capital Homestead Act would produce this result.

Support the Capital Homestead Act at http://www.cesj.org/homestead/index.htm and http://www.cesj.org/homestead/summary-cha.htm

See the article “The Absent Conversation: Who Should Own America?” published by The Huffington Post at http://www.huffingtonpost.com/gary-reber/who-should-own-america_b_2040592.html and by OpEd News at http://www.opednews.com/articles/THE-Absent-Conversation–by-Gary-Reber-130429-498.html

Also see “The Path To Eradicating Poverty In America” at http://www.huffingtonpost.com/gary-reber/the-path-to-eradicating-p_b_3017072.html and “The Path To Sustainable Economic Growth” at http://www.huffingtonpost.com/gary-reber/sustainable-economic-growth_b_3141721.html. And also “Second Income Plan” at http://www.huffingtonpost.com/gary-reber/second-income-plan_b_3625319.html

Also see the article entitled “The Solution To America’s Economic Decline” at http://www.nationofchange.org/solution-america-s-economic-decline-1367588690 and “Education Is Critical To Our Future Societal Development” at http://www.nationofchange.org/education-critical-our-future-societal-development-1373556479. And also “Achieving The Green Economy” at http://www.nationofchange.org/achieving-green-economy-1373980790. Also see it complete with the footnotes at http://foreconomicjustice.org/?p=9082.

Also see “Financing Economic Growth With ‘FUTURE SAVINGS’: Solutions To Protect America From Economic Decline” at NationOfChange.org http://www.nationofchange.org/financing-future-economic-growth-future-savings-solutions-protect-america-economic-decline-137450624 and “The Income Solution To Slow Private Sector Job Growth” at http://www.nationofchange.org/income-solution-slow-private-sector-job-growth-1378041490.

http://www.epi.org/publication/ratio-job-seekers-job-openings-slips-3-1/