The labor market is going through an unprecedented realignment. Job openings reached a series high of 9.2 million in May 2021, hires and quits are near record rates, and layoff rates are at a record low. At the same time, unemployment remains elevated and labor force participation is still depressed. 

This realignment has been cast as one in which would-be workers have the advantage, as workers benefit from large signing bonuses and are able to hold out for better opportunities. The ubiquity of “help wanted” signs in shop windows, along with stories of employers struggling to find employees, indicates that workers are in a strong negotiating position.

Recently released data on the job openings rate by state—job openings as a share of employment plus job openings—can help add additional nuance to the story. While there are certainly national trends that affect everyone, state-level policy and industry-level variation could be the underlying story that many accounts are missing. Ultimately, the frictions that workers and employers face vary by state.

National Trends

By one measure, the record job openings appear normal—the ratio of the unemployed to job openings, colloquially known as the “job seekers ratio,” is near pre-pandemic levels. The job seekers ratio is a rudimentary gauge of whether there is an overall job shortfall (not enough jobs for the people seeking them) or job surplus (more job openings than people to fill them). In May 2021, there were 9.3 million unemployed and 9.2 million job openings across the country, a ratio of about 1 job seeker for each job opening (Figure 1).

Figure 1. National Job Seekers Ratio

^{Source: Author’s calculations. Bureau of Labor Statistics, Employment Situation and JOLTS, via Haver Analytics. Gray shading indicates recession.}

The high number of job openings is matched by a large number of unemployed workers. One unique feature about this recession is the speed at which the job seekers ratio fell to pre-pandemic levels. Unlike past recoveries, workers have many more options available to them, and sooner. This could be indicative of workers holding out for better opportunities as employers add jobs that are going unfilled. If this is the case, the country may need even more job openings for labor markets to recover fully, as overall employment is still below pre-pandemic levels. In fact, the prime-age (age 25-54) employment-to-population ratio is still 3.3 percentage points below its pre-pandemic rate, which means that nearly 4.2 million fewer prime-age Americans have jobs in June 2021 compared to January 2020.

Nationally, some industries have experienced greater rates of job openings and hiring than others. Record job openings occurred across most industries (with the exception of construction, financial activities, and information) in early 2021. As a share of industry employment, the job openings rate in leisure and hospitality has peaked above the rest in the past three months, rising to 9 percent in May, several percentage points above other industries. The leisure and hospitality hiring rate also reached 9.3 percent in the same month.

State Level Differences

State-level data allow us to explore whether the apparent inability to find workers is pervasive everywhere, or whether there is some variation from state to state.

Twenty-seven states witnessed record numbers of open jobs within the first quarter of 2021; 30 states in all had record rates of job openings. However, the ratio of total job seekers to job openings varies widely by state. New York, California, and Hawaii have about two job seekers for every job opening. Vermont, New Hampshire, Nebraska, South Dakota, Idaho, Utah and Montana have the reverse: about two job openings for every job seeker (Figure 2).

Figure 2. Job Seeker Ratio by State, March 2021

^{Source: Author’s calculations. Bureau of Labor Statistics, LAUS and experimental state JOLTS, via Haver Analytics.}

To better understand the mechanisms underlying the wide-ranging job seekers ratio by state, we can look at state-level payrolls and unemployment rates relative to their pre-pandemic levels.[1] Utah and Idaho already surpassed their January 2020 payroll levels by April 2021, and are nearly back to their pre-pandemic unemployment rates (Figure 3). South Dakota, Montana, and Nebraska returned to or fell below their January 2020 unemployment rates by April and very nearly returned to their pre-pandemic payroll levels. In all five of these states, there are about twice as many jobs available as workers to fill them. In these states, there appear to be more jobs than workers available to hire.

Figure 3. State Payroll Recoveries vs. State Unemployment Rate Recoveries, April 2021

^{Source: Author’s calculations, April 2021 vs. January 2020. Bureau of Labor Statistics, LAUS, via Haver Analytics. April 2021 data are selected for more direct comparison, given that data from the reference periods in the household and establishment surveys for that survey month are more likely to overlap with latest March 2021 state job openings data, which count unfilled job openings through the last business day of the survey month. The latest June 2021 state payroll and unemployment data reveal a similar pattern.}

On the other hand, Hawaii, Nevada, and New York are farthest behind in their labor market recoveries; they have about twice as many job seekers as jobs available. Thus, about half of current job seekers would still be without work if all of the job openings were filled in these states. These states with relatively weaker labor market recoveries took a more significant economic hit during the pandemic, in part because of their larger accommodation and food service industries,[2] but also because they were generally more restrictive and slower to reopen than states with stronger recoveries. The number of job seekers in these states with slower recoveries dwarf the high levels of job openings.

The variation between states seems to be driven primarily by the speed of reopening and the related employer demand for workers. The states that have been able to reopen quickly and post more jobs have been successful at returning to their pre-pandemic employment rates; this group has been so successful that even compared to pre-pandemic employment levels they may not have enough workers to fill all their job openings. By contrast, the states that have been slower to reopen and slower to post new jobs still have a long backlog of workers to employ.

Although there is roughly the same amount of jobs available as the number of job seekers, this does not mean that the jobs available match the skills of those looking for work or the location of the workers. Many workers who lost their jobs during the pandemic began recalibrating their skills for other occupations. Additionally, many people relocated during the pandemic, and the geography of post-pandemic jobs has likely changed. A recent article suggests the shift in the geography of jobs is occurring even within metropolitan areas—restaurants near suburbs are reportedly struggling to fill positions to keep up with customer demand, while restaurants in inner cities are seeing reduced demand for their services since many people working remotely have not returned to in-person office jobs in urban cores. These types of mismatches may persist for some time.

While reopening speed, industry distribution, and the resulting locations of job openings help explain much of the state-by-state variation, barriers to labor supply are likely still a binding constraint across most, if not all, states. The anti-work incentives built into the pandemic unemployment bonuses are felt across the country and difficulty hiring workers is reported widely. The continued generosity of enhanced and extended unemployment benefits may pose an increasing problem for states with both high job openings and elevated unemployment. Previous research suggests that extended unemployment benefits can delay worker’s return to work, making the eventual job search harder as skills atrophy overtime.

However, there is hope for states eager to support their workforce’s return to work; among the thirteen states that reinstated work search requirements before 2021, many have seen close to full labor market recoveries.[3] In addition, just over half of states are ending their participation in the expanded unemployment benefit programs this summer—in the coming months, it will be interesting to track whether states that withdraw from federal programs early see a larger boost in payrolls. Initial reports already suggest that unemployment is falling in states that have decided to withdraw from supplemental and expanded federal unemployment benefit programs earlier than their September expiration, although many of these states also reopened faster.

Now that virtually all states have lifted the most consequential restrictions, businesses nationwide should be able to increase hiring. This summer has the potential to be pivotal for employment growth and job openings across the country. As the economy continues to recover, policymakers will need to focus on amending policies that are keeping workers on the sidelines while also removing barriers that could prevent employers from staffing back up.