Corte Madera, CA — (ReleaseWire) — 06/27/2022 — The JOLTS open jobs number has revealed itself as not a reasonable representation of serious job openings and thus cannot be confidently relied upon in the future. Below is the detailed report on this, and the pdf version with references and full calculations can be downloaded for free here.
Economists can easily determine there’s a substantial labor surplus as even CPI-gauged real wages decreased 2.4% in 2021, a year of record corporate profits by every system of measurement (e.g, after tax profits increased 37.3%). Add at least another -4.6% to the decrease in CPI-gauged real wages for a total decrease in real wages of at least 7% based on actual inflation (mainly due to CPI’s blatant massive underestimation of rent and owner equivalent rent; see Exhibit A) and that means that there’s actually a massive labor surplus. We also know there’s a massive labor surplus by looking at comparative OECD Working Age Employment Rates wherein several countries absolutely destroy the US despite having universal healthcare and thus working not being a matter of life and death. Faced with a massive labor surplus, employers have seen no need to substantially raise wages in order to retain or obtain employees despite having ample excess revenue with which to do so.
While inflation may not have been noticeable to the average worker in distant years past, the fact that big inflation has been upon us currently for over a year now is no secret to anyone (with CPI hitting 5% in May 2021). Everyone who eats food, which is to say everyone, knows inflation is raging. The average person doesn’t know what the heck a CPI is, but they know how much they need to maintain or improve their standard of living. After all, they’re the ones who know what their own budget and bills are.
However, during this time period of massively decreasing real wages, the gap between the U-3 reported number of unemployed (jobless people actively applying; 5,964,000) and the JOLTS reported number of open jobs (10,353,000) greatly widened to 4,389,000 (a gap that taken on its own could even imply a large labor shortage to laymen) thus exposing the reported open jobs number as useless and incompatible with the standard economic model. In other words, the JOLTS open jobs number is not a reasonable representation of serious job openings. This revelation represents a loss for economists who now have one less citable data point. The only alternative to getting rid of the JOLTS open jobs number, at least under its current methodology, would be to get rid of the law of supply and demand. The ability to confidently cite the JOLTS open jobs number has always just been wishful thinking as it is a self-selected, self-reported survey with zero scrutiny as to the employer’s level of seriousness toward hiring for the reported open job (even merely accepting applications satisfies the requirement). Further, while we can’t just create jobless people out of thin air, we can create reported open jobs out of thin air, and treasonous organizations even have the incentive to do so in attempt to influence government policies in ways that cut their costs such as: (1) reducing the perceived need for social safety nets in order to reduce their tax burden, (2) promoting massive increases to work visas and illegal immigration, and (3) promoting international “free trade” agreements purposed to outsource jobs.
A government statistic has plausible believability until the day that it doesn’t. When you report 73.6% more open jobs than jobless people actively applying in the face of an at least 7% decline in actual-inflation-gauged real wages and an increase in after tax corporate profits of 37.3%, that day has very obviously come for the JOLTS open jobs number with it being exposed as completely unbelievable and consisting of a high percentage of very unserious “openings.” While the unseriousness of reported job openings can also come in forms that are more qualitative and difficult to measure (such as the extent to which employers are unwilling to train or the extent to which employers limit their consideration to people who fulfill an impossibly unreasonable wish-list and only hypothetically exist), when we’ve got the quantitative data outlined in the previous sentence, it’s an open and shut case that all of the “THerE’s a laBOr shoRTAge” phony hand wringing and just-so stories in the world cannot defeat. In fact, the idea that there’s a general “labor shortage” is something typically espoused by people who don’t even know what those words mean. While it is possible that there is a labor deficit at wage levels currently being offered, you cannot lower your offer price in real terms for an item and then claim there’s a shortage of it. A shortage is when there is no price high enough that will buy enough to meet demand.
The year of 2021, a year of big profits and big supposed job openings was a stress test for the JOLTS open jobs number and it failed big time as revealed by the massive decrease in real wages. Now that the JOLTS open jobs number has revealed itself as just one more useless thing published by the BLS, the general public is left with the OECD’s quarterly publication of the Working Age Employment Rate as the only high level thing of value worth paying attention to regarding the unemployment situation as it automatically takes into consideration that the retirement age in the US is 65 and thus neutralizes (renders meaningless) the effects of changes in birth rates compared to the Labor Force Participation Rate which does not. Between this paper and the paper “Inside Donald Trump’s Unemployment Rate,” BLS has had all of their most famous statistics completely debunked and now sits at the precipice of irrelevance. Rather than continue to propagate zombie ideas and waste taxpayer money on all of the work that goes into the various useless unemployment rates and the useless open jobs number, BLS should begin publishing the Working Age Employment Rate and do so on a monthly basis. As automation grows, the context of the Working Age Employment Rate will likely have to be supplemented with a weekly average hours worked per worker statistic.
As an aside, it should go without saying that, as the US is an approximately 70% consumer based economy, when employers decide to so violently lower real wages, it causes a contraction in economic activity.
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