April 16, 2021

Off the Charts: Jobs Recovery in Europe Is Also Painfully Slow

The decline was not large — 24,000 jobs, or 0.1 percent of the 19.3 million people out of work in May. But it was the first month in more than two years that there had been a decline.

Some, but not all, of that decline was in Germany, where unemployment has been falling even as it rose in other countries. Other euro zone countries that reported declines during the month were Austria, Finland, Ireland, Italy, Portugal, Slovenia and Spain. Two of the 17 countries in the zone, Estonia and Greece, have yet to report.

The accompanying charts show how the number of people unemployed has risen or fallen since March 2008, the month that overall unemployment in the euro zone hit its recent low. The charts also show the trends in two major countries outside the zone, Britain and the United States, where unemployment had bottomed out earlier. In the United States, the low was reached in October 2006, more than a year before the recession officially began.

It should be noted that the number of unemployed workers does not exactly equate to the number of people without jobs, which may be changing at a faster or slower rate. Discouraged workers who conclude they cannot get a job can drop out of the labor force, and thus not be counted. But when things begin to improve, those people can begin to search for employment and be newly counted among the unemployed.

Perhaps the most striking thing about the charts is how little improvement there has been in most of the countries shown. Germany is the striking exception to that, of course, and the number of unemployed in the United States has been falling steadily, if slowly, since 2010. On Friday, the government reported that the American unemployment rate fell to 7.4 percent in July, the lowest since December 2008. The number of people out of work in Britain fell in 2012 but has stabilized in recent months.

Among the most troubled countries in the euro zone, only in Ireland has there been a significant decline in the number of unemployed workers, although the figure remains nearly one and a half times as high as it was in 2008. In Greece, the number out of work appeared to stabilize late last year, but it began to rise again this year and was at the highest level yet in April, the last month for which data was available.

Perhaps the most extraordinary development has been in the Netherlands, where the number of unemployed workers has begun to rise rapidly after rising relatively slowly early in the credit crisis. Nonetheless, the latest unemployment rate for the Netherlands is only 6.8 percent, a figure that is lower than that of either the United States or Britain and about half the rate in Ireland.

For some countries, the reported unemployment rates remain very high. Although the number of unemployed workers in Portugal was reported to have fallen in both May and June, the unemployment rate remains at 17.4 percent, not far below the high of 17.8 percent reached in April. In neighboring Spain, two months of falling unemployment have reduced the rate by only 0.2 percentage points, to 26.3 percent. At least Spain no longer ranks as having the highest unemployment rate in the euro zone, as it did at the end of 2012. Greece, at 26.9 percent at last report, has regained that unfortunate position.

Floyd Norris comments on finance and the economy at nytimes.com/economix.

Article source: http://www.nytimes.com/2013/08/03/business/economy/in-europe-too-a-painfully-slow-jobs-recovery.html?partner=rss&emc=rss

You’re the Boss Blog: How Our Sales Process Broke Down

Staying Alive

The struggles of a business trying to survive.

Editor’s note: Paul Downs is writing this week about his decision to hire a sales consultant. The series started with this post.

At the beginning of 2012, I had set a sales target of $200,000 a month, and in the first two months of the year, we hit that number. But March came in weak: we sold only $135,732. April was almost as bad, with just $146,677 in new orders. And May was even worse: $114,042. By the end of May we were $200,000 behind our target, and I was worrying about running out of work.

We can generally handle a down month now and then without difficulty, as these are often followed by months in which we far exceed the quota. But three weak months in a row means a serious mismatch between our production capacity and the amount of work we actually have on hand. That’s bad in two ways: first, the missing sales mean less cash coming in from deposit payments, and second, we will eventually have no work to do. I had hired five people in 2011 to ensure that I could get $200,000 worth of work out the door each month. That was now looking like a big mistake. Would I have to lay off all of those people?

Naturally, I spent a lot of time thinking about what was happening, and eventually I decided that my problem was the economy. In the spring of 2012, there was quite a lot of chatter in the media about poor job growth and the possibility of a double-dip recession. I latched on to that story and convinced myself that the problem was out of my hands. I was ignoring the possibility that we simply weren’t doing a good job with sales, mostly because my method had worked well in the past. I hadn’t changed anything about how we made sales, and it just seemed as though that couldn’t be the problem.

But now, when I look back at what was happening, it’s clear to me that there were danger signs I ignored. In particular, I downplayed a couple of big jobs that slipped through our fingers. One, for a large company in California, had seemed to be a lock. Our contact at that company had even told us that we had the job and promised a deposit the following week. But it never came. Instead, I got a call from an office furniture dealer who was providing furniture for the rest of the project, a major office expansion.

He had seen our proposal and said he was very impressed. He called to see if there was some way we might work together on future projects. Or so he said. I spoke to him about how we might collaborate and left with the impression that we would work together soon. But I never heard back from him, and the job we had been counting on didn’t come through either. Eventually, we heard from the client that it “had decided to go in another direction.” The dealer had simply bought the job out from under us. Having seen our product and our pricing, he had come up with a competing offer and price that the client accepted.

In another instance, we put a great deal of time into working with a military client, doing extensive design work, revision after revision, that the client took and used as the basis for its bid package. It went on to award the job to another company, one it had worked with previously. Both of those jobs were large enough that, had we received either of them, we would have exceeded our targets for April and May. And in that case, I might not even have noticed we had a problem. But we are vulnerable when we lose the big ones, because a bunch of smaller orders may not take us to our target. And in this case being played for chumps made a real difference.

As I wrote in my posts last fall about my AdWords debacle, I took my sales problem to my Vistage group in May 2012 and got some good advice — namely, that the problem was not the economy and that I needed to look within my own organization. At this point in my AdWords posts, I spoke about what I did with my campaign to restore a particular type of incoming call.

But I left out the other big change I made in response to a recommendation from one of the members of my Vistage group, Sam Saxton. Mr. Saxton owns a custom stair-making company, Salter Spiral Stair, that is in many ways similar to mine. It manufactures custom items and sells them over the Internet. He told me that he had hired a sales consultant who had helped him double his sales volume in the previous two years, and he suggested that I follow his path.

Wednesday: Meet the Sales Consultant.

Paul Downs founded Paul Downs Cabinetmakers in 1986. It is based outside Philadelphia.

Article source: http://boss.blogs.nytimes.com/2013/06/18/how-our-sales-process-broke-down/?partner=rss&emc=rss

Sales of Used Homes Dipped in March

The National Association of Realtors said Monday that sales fell 0.6 percent to a seasonally adjusted annual rate of 4.92 million, from 4.95 million in February. The February figure was revised lower.

Still, sales in March were 10.3 percent higher than a year earlier.

Sales have remained mostly unchanged in the last four months — largely, analysts have said, because of a limited supply of homes. Economists still predict the housing market will continue to recover this year.

The low supply, combined with rising demand for housing, could accelerate construction in coming months. The Realtors’ group said buyer traffic was 25 percent higher than a year ago.

“A disappointing result for U.S. existing-home sales, but with inventories still very tight, the outlook remains favorable,” Jennifer H. Lee, an economist at BMO Capital Markets, said in a note to clients.

A steady housing recovery is providing support to the economy this year. Builders are starting work on more homes, increasing construction jobs. And home prices are rising. Higher prices tend to make homeowners feel wealthier and encourage more spending.

But the pace of purchases of used homes has been little changed in recent months, partly because of the tight inventory. The supply of available homes has fallen nearly 17 percent in the last year to 1.93 million.

At the current sales pace, that supply would be exhausted in 4.7 months, less than the six months typical in a healthy market.

The supply rose 1.6 percent from February to March. The Realtors’ group says it expects a much bigger increase in supply this month as the spring selling season began.

The tight supply helps explain rising prices. The median price rose 11.8 percent from February to March to $184,300, the biggest one-month gain since 2005.

The higher median price partly reflects bigger increases in sales of more expensive homes. Sales of homes priced from $500,000 to $750,000 jumped 25.3 percent from a year earlier. By contrast, sales of homes priced from $100,000 to $250,000 rose just 7.1 percent.

First-time buyers, who usually drive housing recoveries, are playing a smaller role in the current rebound. They accounted for 30 percent of sales last month, the same as in February. First-time buyers usually make up about 40 percent of buyers in a healthy market.

One bright sign in the report is that the percentage of so-called distressed sales fell sharply. Distressed sales include foreclosed homes and homes in which the size of the mortgage exceeds the value of the home.

Those sales fell to 21 percent of the total in March, down from 25 percent in February. That is the lowest proportion since the Realtors’ group began tracking the figure in October 2008.

Steady hiring and near-record-low mortgage rates have helped increase sales.

Since the housing bubble burst more than six years ago, banks have imposed tighter credit conditions and required larger down payments. Those changes have left many would-be buyers unable to qualify for very low mortgage rates.

Mortgage rates dropped last week to near-record lows. The average rate for a 30-year fixed mortgage dropped to 3.41 percent from 3.43 percent. That is not far from the record low of 3.31 percent last November.

Article source: http://www.nytimes.com/2013/04/23/business/economy/sales-of-used-homes-dipped-in-march.html?partner=rss&emc=rss

Economix: The Employment Rate

Spare a moment for an overlooked economic indicator: The employment rate.

The government said Friday that 58.5 percent of Americans over the age of 16 had jobs in March.

This employment rate has held remarkably steady since 2010, never higher than 58.7 percent or lower than 58.2 percent. Job creation has basically kept pace with population growth. Nothing more. The share of Americans with jobs is still stuck about 5 percentage points lower than before the recession.

Source: Bureau of Labor Statistics

This may seem surprising. After all, the unemployment rate — the labor market indicator that gets all the attention — has fallen from 9.8 percent to 7.6 percent over the same three-year period.

It’s only surprising, however, because people tend to treat the unemployment rate as an inverse of the employment rate. But notice that the two numbers do not sum to 100 percent. About 34 percent of Americans are missing: People who don’t have jobs, and are not actively looking.

Some of those people are retired or disabled. Some are stay-at-home parents. And some of them have stopped looking for work because they have given up hope of finding work. The government estimates membership in each of these groups. It is clear, for example, that a growing share of Americans is elderly. But it is impossible to know how many 66-year-olds would return to work if jobs were available, or how many parents would put children in day care if they could earn enough to cover the cost.

The unemployment rate treats all of these people as invisible. The employment rate treats them all as potential workers. The truth surely lies in between: It has become a little easier, but not much, to find work if you want it.

Article source: http://economix.blogs.nytimes.com/2013/04/05/the-employment-rate/?partner=rss&emc=rss

Corner Office: Ilene Gordon of Ingredion, on the Importance of Mentors

Q. What are some leadership lessons you’ve learned from mentors over the years?

A. There was one gentleman in particular. He had three daughters and his attitude was: “Look, you’re really smart, you’re very ambitious and focused. I can help teach you about business.” This was around 1982, and I’d already been out of business school for several years. He made it a priority to help me to hone my business skills.

I was a strategist by training, and I was doing acquisitions. I was smart, I was analytical, but he said to me: “You ought to run some of these businesses and see how good your analysis was. It may look great on paper, but you have to motivate and inspire people. You’re 30 years old and the guy you’re leading is 55. How do you get the best out of him? That’s your challenge.”

So, early on, this mentor gave me that opportunity to run businesses. I’ve been running them since I was 32.

He had a philosophy of putting people in jobs that were bigger than they were. If somebody has talent and good people skills and drive, I think you can stretch them and put them in a job that they’re not quite ready for, so they grow into it. That’s what people did for me, so I’m a big believer in doing that and taking young people and stretching them.

And employees love to hear that, because they feel like they’re going to get opportunities. There’s a big competition for talent. People will leave their company if they think they’ll have more opportunities elsewhere. So you need to offer opportunities to your young people. And you’ll have a much better retention.

It’s not all about a 2 percent raise; it’s really about opportunity. I’m taking these lessons in how people treated me as a young professional and use those lessons today to excite our people.

Q. How do you know if somebody’s able to stretch into a big new job?

A. One question somebody once asked me was, “What do you think are important attributes to be successful in leadership?” I said it’s about tenacity. It’s never giving up. It’s having a Plan B. And that’s one of my favorite expressions: Have a Plan B, because Plan A doesn’t always go well, or maybe it’s derailed by a competitor or somebody else’s new product or some type of regulation.

My point is to always have a Plan B that you can implement. Maybe you have to go to Plan C or D, but the point is that you always have to have a backup plan.

I look for young people who have a lot of energy, and who treat other people well, because we’re not looking for bullies. Some people push their way through things and they’re not collaborative. I look for people who don’t give up, who are very focused and organized but are also able to collaborate with other people, because in today’s organizations, you actually may not have anybody directly reporting to you but may have a team of 10 people from other parts of the organization. They’re your virtual team.

So I look for young people who have the energy and drive to get things done, to keep their eye on where they’re going but at the same time realize they can’t do it alone. It’s not just a one-person show. You can’t be the micromanager; you have to be able to get things done through others.

Q. What else do you do to help develop younger managers?

A. I use one dinner a year with my board to bring in young, high-potential managers. We have everybody give an “elevator speech.” You have three minutes to tell the board and other people in the room where you came from, the challenges you’re facing and how you’re trying to create value for the company. Everybody might want to take 15 minutes, but you have to be succinct.

This is part of what we’re looking for in people who have potential; it’s all about communication. What are the challenges you have, and you have three minutes to explain them, because there are 40 of you and we’re going to be here all night otherwise. And if you take somebody else’s time, that’s not respectful. It’s all about being succinct and articulate.

Q. What questions do you ask when you hire? What qualities do you look for in job candidates?

A. I like to look at the person’s résumé, and ask a lot of questions about how they made decisions to go from one company to the other. Did they have a plan? Not everybody has to have a structured plan, but I like to hear their thought process. Did they make things happen for themselves and their companies, or was it just serendipity? And serendipity is sometimes O.K., too.

So that’s how I get into the interview and get people talking, but the key question I always ask, going back to my own theme, is: Who mentored you? Who did you learn from? Because I feel that, with the people we’re hiring, we’re hiring all their mentors, too. I want to know if they learned from somebody who was an operating expert or somebody who was a strategist and what companies those mentors worked in. That’s because I’m not just hiring the person sitting there; I’m hiring the four people who mentored him. I don’t think there’s anybody who’s successful in their role today who hasn’t been mentored by somebody.

Business is always challenging. It doesn’t always go well, and Plan A doesn’t always work. So I look for people who have dealt with some adversity in their life. It could have been in business — maybe their company was acquired, and they had to figure out what they wanted to do and made a change, rather than sitting around for two years lamenting, “Why me?”

Or somebody might have lost their parents early on. The point is, they’ve dealt with some type of adversity or illness and they came back and they persevered.

That’s what I look for, because very few people have had perfect lives. You want people who are able to have a Plan B and C, and to rise above a challenge, move ahead and just get on with it, and have that can-do attitude.

Article source: http://www.nytimes.com/2013/03/17/business/ilene-gordon-of-ingredion-on-the-importance-of-mentors.html?partner=rss&emc=rss

Media Decoder Blog: Seared by a Flop, DreamWorks Animation Reports $82.7 Million Loss

9:59 p.m. | Updated LOS ANGELES — Charges totaling $165 million, including a hefty write-down related to the underperforming movie “Rise of the Guardians,” prompted DreamWorks Animation to report an $82.7 million loss in the fourth quarter.

The company reported quarterly financial results on Tuesday after the close of trading. The company’s shares dropped 1.25 percent in regular trading, to $16.61, and fell less than 1 percent in after-hours trading.

“Rise of the Guardians,” which was released in November and directed by Peter Ramsey, cost more than $250 million to make and market, but took in less than $303 million at the global box office; that number is split 50-50 with theater owners. The company said on Tuesday that it would take an $87 million write-down for the film.

DreamWorks Animation, which has a remarkably consistent track record of hits, had strong hopes that “Rise of the Guardians” would start a new franchise. But families did not respond to its dark take on some classic childhood characters, like the Easter bunny, and instead it became perhaps the biggest flop in the company’s history.

The company, based in Glendale, Calif., also took fourth-quarter charges of $54 million related to a recent decision to withdraw from its schedule a movie planned for release next year (“Me My Shadow”). As part of its reshuffling of releases, DreamWorks Animation will lay off several hundred of its 2,000 employees.

Jeffrey Katzenberg, the company’s chief executive, mentioned the layoffs in a conference call with analysts on Tuesday. About 350 people will lose their jobs by the end of the year. The plan, he said, is to “meaningfully reduce our overall cost structure.”

For the quarter, DreamWorks Animation reported a loss of $82.7 million, or 98 cents a share, in contrast to a profit of $24.3 million, or 29 cents a share, for the same period a year ago. Revenue was $264.7 million in the recent quarter.

Because of the charges, which also included $20 million related to films in development and $4.6 million in restructuring costs, DreamWorks Animation reported a loss of $36.4 million for the year.

Mr. Katzenberg noted that the company scored big last year with “Madagascar 3: Europe’s Most Wanted,” which took in $746.6 million at the global box office. Still, he said, “One of the new challenges we face is heightened competition for family audiences,” making the perfect release date for films “critically important.”

Article source: http://mediadecoder.blogs.nytimes.com/2013/02/26/dreamworks-reports-82-7-million-loss/?partner=rss&emc=rss

You’re the Boss Blog: When Employees Wonder What’s Going On

Building the Team

Hiring, firing, and training in a new era.

“Bryan, we don’t know what’s going on anymore.”

Hazel, one of our best floral designers and one of the sweetest people I know, was sharing her frustration with me. She had joined H.Bloom to be part of a fast-growing start-up. But because we had grown so fast, and I wasn’t communicating effectively, she no longer felt part of the team.

It used to be easy. When we operated only in New York, the entire team – eight to 10 people – would gather on the comfortable couch and chairs that we had splurged on right after we started the company. We’d each grab a beer and have an informal debriefing of the company’s goings-on: what worked well and went wrong this week, our plans for next week, and things that we could do to improve the overall company. Each person knew exactly what was happening, and as a result, felt like an integral part of the team.

Then, we started to grow quickly, opening in Washington, Chicago, San Francisco and, most recently, Dallas. Last year, our headcount nearly doubled, growing to 75 employees from 40 by the end of 2012. While each person who has joined H.Bloom has done so to be part of a start-up, we could no longer sit around on the same couch and talk about the business.

I am sure Hazel’s frustration was representative of the feelings of many within the company, and I was disappointed in myself, because I was failing at one of a chief executive’s most important jobs: communication.

A couple of years ago, Fred Wilson, the well-known venture capitalist, wrote a post on his blog called “What a C.E.O. Does.” He said it was simple:

A C.E.O. does only three things. Sets the overall vision and strategy of the company and communicates it to all stakeholders. Recruits, hires and retains the very best talent for the company. Makes sure there is always enough cash in the bank.”

To keep up with our rapid expansion, I needed to step up my game in communication. So here’s what I did:

  1. A weekly e-mail update. I started sending Bloom’s Bulletin to the entire company every Monday. The bulletin has four parts. First, there’s always an important topic that I discuss at length. In one e-mail, I talked about one of our restaurant customers in New York, one of the best restaurants in the world. The general manager there does an otherworldly job of motivating the entire staff to achieve an unparalleled level of  service. And just as this restaurant views every course as if it were the only course, we view every delivery as if it were the only delivery. Second, I choose a flower or plant of the week. This is an easy way to get the entire company up to speed on our product offerings. Third, I provide complete transparency on the financials of our business: revenue by market, gross margin, etc. Fourth and finally, I enumerate general happenings in the business: new hires, departures, recent media coverage, a new initiative, etc.
  2. A monthly all-company meeting. I started hosting an all-company meeting through a conference call from a different city each month. This gives me an opportunity to communicate directly with everyone in the company at the same time, while also giving me a chance to be with a different market’s team each month. In the presentation, which usually lasts an hour or an hour and a half, I present the previous month’s financials and progress and talk about strategic initiatives. Then, I turn the call over to someone else on our management team to talk about sales, marketing, finance, technology, talent or operations.
  3. A monthly local team meeting. I use the time immediately after the all-company meeting to chat with the team in that local market. It usually lasts 45 minutes to one hour and is a great forum for answering questions. The all-company meeting tends to be a one-way presentation, whereas this local team meeting is an opportunity to engage in real dialogue.
  4. Office hours. Every month, my assistant sets up 20-minute sessions, using Google Docs, for me to interact with individual employees. They can sign up in an available slot, and then ask me questions directly, give feedback or pass along ideas. It’s a great way for me to have some one-on-one time with people, and it is where I receive the best feedback. It also provides me with a good sense of the overall morale within the company.

This communication strategy will continue to evolve and still needs to improve. At the end of 2012, our head of talent distributed an employee survey to determine what we needed to work on in 2013. We were excited to get 100 percent participation in the survey but concerned to find that communication was still an issue for our employees. We scored a 3.7 out of 5.

The challenge we are still struggling with is communicating from one market to another. We rolled out Yammer a year ago to foster this communication, and it works well for the day-to-day celebration of individual employee or market successes. However, it was not providing the forum within which one market could learn from another. So, we are now trying a regular video conference with all of the market managers, where they can ask questions of each other, but equally important, begin to build a relationship so they feel comfortable reaching out to one another directly whenever a question arises.

Eventually, when we are in 25 cities, the needs for communication will be different from what they are today, when we are in five. The only thing I know to do is to ask for feedback continuously from the team, and make changes when necessary.

I end my bulletin each week with the same sentence: “Please send me an e-mail or call me on my cellphone with questions, comments, feedback or suggestions.” I promised Hazel and the rest of the team that I would work very, very hard to communicate effectively. It’s my job.

Bryan Burkart is a founder of H.Bloom. You can follow him on Twitter.

Article source: http://boss.blogs.nytimes.com/2013/01/24/when-employees-wonder-whats-going-on/?partner=rss&emc=rss

Jobless Claims Drop as Storm’s Effects Fade

The Labor Department said Thursday that applications for unemployment benefits dropped 25,000 last week to a seasonally adjusted 370,000.

New unemployment claims surged a month ago after the storm forced businesses to close in the Northeast. Applications jumped to 451,000 in the week that ended Nov. 10. People can claim unemployment benefits if their workplaces are forced to close and they are not paid.

Some analysts were encouraged by how quickly new jobless claims returned to pre-storm levels. Pierre Ellis, an economist at Decision Economics, said the rapid drop suggested that companies were quickly rehiring workers displaced by the storm. Rebuilding and repair efforts could also be creating jobs, he said.

The early impact of Hurricane Sandy could still be seen in the four-week average of new unemployment applications. It rose to 408,000 last week.

Before the storm hit on Oct. 29, new jobless claims had fluctuated this year from 360,000 to 390,000. They were above 400,000 for most of last year. That has coincided with only modest declines in the unemployment rate.

The impact of Hurricane Sandy is also likely to depress November’s employment figures, which the government will report on Friday. And fears over looming tax increases and government spending cuts also may have dragged on job gains last month.

Economists were forecasting on average that employers added 110,000 jobs in November, according to FactSet. And they predicted that the unemployment rate would remain at 7.9 percent. But some analysts expected much lower job gains, roughly 25,000 to 50,000, because of the storm and anxiety over the fiscal crisis.

Article source: http://www.nytimes.com/2012/12/07/business/economy/jobless-claims-fall-as-storms-effects-fade.html?partner=rss&emc=rss

Bucks Blog: Jobs That You Can Do Forever

In the Your Money special section that we published in print on Wednesday, our theme was “Bulletproofing Your Finances.” One way to make sure you never run out of money is to have a job that you can continue to do until your dying day.

There are plenty of stockbrokers, accountants and lawyers who work well into their 70s or 80s, but if you lack the training to do that kind of work it’s hard to switch into it once you’re past the traditional retirement age. So we looked for positions that seemed to have a growing number of (much) older workers, and that’s when we found out about all of the work in casinos for the older set.

Could you do what you do all day at the age of 80? If not, have you looked at your retirement savings trajectory, found it wanting and considered switching into a career where you could work well past the age of 65?

Article source: http://bucks.blogs.nytimes.com/2012/11/14/jobs-that-you-can-do-forever/?partner=rss&emc=rss

Today’s Economist: Casey B. Mulligan: What Job Openings Tell Us


Casey B. Mulligan is an economics professor at the University of Chicago. He is the author of “The Redistribution Recession: How Labor Market Distortions Contracted the Economy.”

A high ratio of unemployed to job openings means that the unemployed are competing a lot for jobs, many news reports say, when in fact it could indicate the opposite.

Today’s Economist

Perspectives from expert contributors.

It’s true that a reduction in labor demand — from, say, a new tax on employers — would motivate employers to get by with fewer employees. As they do, employers would reduce job openings and lay off workers. One result would be fewer job openings and more unemployed people, and thereby more unemployed people per job opening.

But a reduction in labor supply in the form of additional subsidies for unemployed people would have similar effects. Unemployed people would be choosier about the jobs they accept, especially the low-wage ones. With more help for people after layoffs, employers and employees in struggling industries would do less to avoid layoffs, especially layoffs from low-paying positions. Either way the result would be more unemployed people.

Subsidies for unemployed people also make labor more expensive as low-wage jobs are more likely to end by layoff and unemployed people can be choosier about the jobs they take. When labor is more expensive, employers have an incentive to get by with fewer employees and for that reason may well reduce the number of job openings they have.

In this way a reduction in labor supply by itself, a reduction in labor demand by itself or both together can increase the ratio of unemployed to job openings. It makes little sense to point to a high ratio as proof that labor demand is low, because it could just as easily tell us that labor supply is low. All a high ratio tells us is that the labor market has contracted, and that we could readily and more reliably detect without any data on job openings by just looking at the unemployment rate itself, or the ratio of employed to population.

My conclusion is not new to labor economists, who have long understood that supply factors could increase the ratio of unemployed to job openings. Christopher A. Pissarides, a professor at the London School of Economics, literally wrote the book on job openings and unemployment, and his book explains how more generous unemployment compensation would have these effects (see Figure 9.2 from his latest edition; I thank my colleague Robert Shimer for this reference).

The black series in the chart below shows the ratio of unemployed to job openings. The chart also shows in red the marginal tax rate on labor income (the extra taxes paid, and subsidies forgone, as a result of working, expressed as a ratio to the income from working) for a typical head of household or spouse based on the ever-changing eligibility and benefit rules for safety-net programs. The ratio increases fastest between the first half of 2008 and the first half of 2009, just when the marginal tax rate series increases the most. Both series peak in late 2010 and decline thereafter. Neither series has returned to its prerecession level.

Ratio of unemployed per job opening is calculated from Bureau of Labor Statistics seasonally adjusted monthly figures for number of unemployed and total nonfarm job openings, as provided by the St. Louis Fed. Marginal tax rates are as calculated by Casey B. Mulligan in Ratio of unemployed per job opening is calculated from Bureau of Labor Statistics seasonally adjusted monthly figures for number of unemployed and total nonfarm job openings, as provided by the St. Louis Fed. Marginal tax rates are as calculated by Casey B. Mulligan in “The Redistribution Recession” (Oxford University Press, 2012).

For the reasons mentioned above, the chart is by no means proof that supply was a major factor during the recession. That proof requires other sorts of analyses, which are shown in my book.

Nevertheless Paul Krugman continues to cite the high ratio of unemployed to job openings as evidence that demand, rather than supply, contracted the labor market: “There are now four job seekers for every job opening, which means that workers who lose one job find it very hard to get another” (see Page 9 of “End This Depression Now!”). He and other economics commentators citing this fact never explain why the very same ratio should not be interpreted as a drop in supply, or as a combination of reduced supply and reduced demand. Instead they contend that the labor market would rebound with still more help for the unemployed.

Believe it or not, Keynesian economics is not the only way to interpret the job openings data.

Article source: http://economix.blogs.nytimes.com/2012/11/14/what-job-openings-tell-us/?partner=rss&emc=rss