Job numbers for January delivered a big and pleasant surprise last week.
Economists expected a dour report after omicron cases surged at the beginning of the year. The thought was that an increased number of workers taking unpaid leave and forgoing paychecks would show up as job losses.
The government release defied those expectations, reporting 467,000 jobs created in January.
The upbeat news was widespread across industries, with even customer-facing service jobs posting strong gains.
The unemployment rate edged up to 4% from 3.9% in December, but for good reasons. More people were lured off the sidelines and into the job market by higher wages and better prospects.
Moreover, the government also showed that November and December were much better for job seekers than previously reported. Gains for the two months were revised up by more than 700,000 jobs.
The upshot is that the numbers point to strength in the 2022 labor market. With hiring up, let’s take a look at a key structure of the job market, the hiring funnel.
The first step in the hiring funnel is job postings. Gone are the days of opening the classified section of your local newspaper to find a job. With job listings now digitized, it’s never been easier – or cheaper – for employers to advertise openings. And they’re doing so in record numbers. According to the Bureau of Labor Statistics, there were 10.9 million job openings in December.
Restaurants in particular are trying to staff up quickly after being hit hard by the pandemic. Other industries where workers are in high demand include health services and office jobs such as information technology and professional business services.
Want ads are just the first stop on the hiring roadmap. A puzzling thing about the current economy is that there are many more jobs than there are unemployed workers. Hiring is clearly more complicated these days. I reached out to my colleague, Ben Hanowell, who analyzes hiring for the ADP Research Institute, for insights.
Ben points out there are multiple places where the process of hiring could be slowed down or tripped up. There’s the application submission, screening by human resources, the interview or interviews, evaluation of the candidates, background checks, offers made, offers accepted, and, finally, the hire. Then people have to actually show up to work.
Any one of these steps could be a bottleneck in the hiring process.
The great resignation has made hiring more difficult. Economists have developed theory of the job search to explain frictions in the labor market. Employers and workers each have imperfect information about each other, which can lead to frictions.
Information mismatches can occur over remote work, wages, job requirements and workplace conditions. The speed at which workers and employers move through the hiring funnel depends on how smoothly they can negotiate all of these frictions.
Finding the right hire or the right employer has always been a challenging part of the job market even under the best circumstances. The pandemic has made this delicate dance even trickier.