The exceptionally tight labor market in Idaho has left many employers hard-pressed to fill job openings. The monthly vacancy yield rate – the number of hires each month relative to the number of job openings at the end of the previous month – provides a barometer for employers’ ability to fill openings while its inverse provides an implied number of months to fill an opening.
An unprecedentedly tight labor market
Well before the COVID-19 pandemic and the economic disruptions it brought, the Idaho labor market would have been characterized as “tight,” but once businesses and the economy at-large reopened, the excess demand for workers relative to their supply only intensified.
One key barometer of a labor market is the ratio of job openings, or vacancies, to the unemployed, which is how macroeconomists typically define a labor market’s “tightness.” The larger the number, the more job openings are chasing after a fixed number of idle workers. For high ratios, we would typically expect to see wages rise as employers are forced to compete for limited talent; conversely, for small ratios, we would expect wages to fall as workers are forced to compete for a limited number of jobs.
Figure 1 plots the monthly job openings-to-unemployed ratio for Idaho as well as the United States for 2001-2021, adjusted for seasonality effects. For the entire sample, the average labor market tightness was about 0.81 openings for every unemployed Idahoan. Throughout 2021 the ratio hovered between 1.5 and 2, and by year’s end it reached a record 2.18.
Note: Job openings are for total nonfarm jobs.
Source: Idaho Department of Labor, U.S. Bureau of Labor Statistics.