During our June 18 webinar, Leah Daniels, SVP of Strategy at Appcast, talked about the current unemployment rate as it relates to finding candidates.
It’s worth taking a closer look at unemployment data – what it means and doesn’t mean – in order to provide further insight into today’s employment marketplace.
Boom and bust
In theory, unemployment data provides a snapshot of how the economy is doing. Low unemployment usually occurs in times of economic prosperity; businesses are thriving and therefore hiring. During an economic downturn, businesses tend to cut back on staff; layoffs are common, as are hiring freezes.
The unemployment numbers go down in good times, the numbers go up when things aren’t so good. These include the number of people filing first-time unemployment claims and the unemployment rate itself.
Historically, this “theory” has held true, with a few occasional ripples, and has made it easy to understand the economy as it relates to the employment marketplace. For the most part, this theory has also coincided with available candidates. In times of low unemployment, candidates have been harder to find. When unemployment is high, there are more people looking for work and therefore more candidates.
A funny thing about history, though. It isn’t always the best teacher. A global pandemic and a national – make that a global – business shutdown presented a new set of circumstances that threw what everyone thought they knew out the window.
For one thing, new unemployment claims quickly skyrocketed, like never before. Just take a look at this chart.
Although new unemployment claims continue to decrease on a weekly basis, the numbers are still extremely high. Just how high?
To put things in perspective, here is a chart that shows the number of new unemployment claims from January 7, 1967 through June 13, 2020. As the chart notes, the shaded areas indicate U.S. recessions.
The Great Recession barely registers as a blimp, when compared to the current situation.
In April, the unemployment rate hit 14.7% (it declined slightly in May, to 13.3%). April saw the highest unemployment rate since the government started keeping records in 1939.
But wait, there’s more. It turns out that April and May numbers were understated because of a classification error. In April, the unemployment rate was actually 19.1%, while in May it was 16.2%.
Woah, record-high numbers. So, there are lots of job seekers, right?
Not exactly. The problem with looking at new unemployment claims, as well as the unemployment rate, is that, this time around, not everyone counted is technically unemployed.
Many people receiving unemployment benefits have been furloughed and are not looking for work; they are waiting for businesses to reopen so they can return to their jobs. Others collecting unemployment are self-employed individuals, which is unusual. These folks, like their furloughed friends, are on pause; they are not unemployed.
From a data analysis standpoint, these “unemployed individuals” confuse the issue. Typically, a person receiving unemployment benefits has to be actively seeking employment. This time, however, a job hunt isn’t necessary in order to qualify for benefits.
For recruiters, the situation becomes even more complicated. No matter how you slice it, there aren’t 45.7 million potential candidates. In addition to furloughed and self-employed individuals, a number of people have already returned to work.
It’s likewise important to note that the business shutdown has disproportionately impacted restaurant and hospitality workers. Unless you’re looking for less-skilled workers, you’re likely to continue to struggle to fill open positions. During the May 19 Appcast webinar, Leah pointed out that the current business environment is unlike the Great Recession, when job losses impacted more industries.
Are there exceptions? Yes. It’s also worth noting that should this become a prolonged recession, job losses will likely become more widespread. Right now, though, for most positions, candidates are still hard to find.
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