What Is the Job Market?
The job market is the market in which employers search for employees and employees search for jobs. The job market is not a physical place as much as a concept demonstrating the competition and interplay between different labor forces. It is also known as the labor market.
The job market can grow or shrink depending on the demand for labor and the available supply of workers within the overall economy. Other factors which impact the market are the needs of a specific industry, the need for a particular education level or skill set, and required job functions. The job market is a significant component of any economy and is directly tied in with the demand for goods and services.
Key Takeaways
- Employers search for employees and employees search for jobs in the job market.
- The job market grows or shrinks based on demand for labor and the number of workers in the economy.
- The job market is directly related to the unemployment rate, a measure of the percentage of people who aren't employed but actively seeking work.
The Job Market and the Unemployment Rate
The job market is also directly related to the unemployment rate. The unemployment rate is the percentage of people in the labor force who are not currently employed but actively seeking a job. The higher the unemployment rate, the greater the supply of labor in the overall job market.
When employers have a larger pool of applicants to choose from, they can be pickier or force down wages. Conversely, as the unemployment rate drops, employers are forced to compete more heavily for available workers. The competition for workers has the effect of increasing wages. Wages determined by the job market provide valuable information for economic analysts and those who set public policy based on the state of the overall economy.
24.9%
The highest rate of unemployment in the U.S, which was documented in 1933.
During difficult economic times, unemployment tends to rise as employers may reduce their staffing numbers and create fewer new jobs, making it harder for people trying to find work. High rates of unemployment can prolong economic stagnation—a sustained period of little-to-no growth in an economy—and contribute to social upheaval, leading to the loss of opportunities for many individuals to live comfortably.
A report called the Current Population Survey can measure the state of the job market. It's a statistical survey performed every month by the U.S. Bureau of Labor Statistics (BLS). The study includes a representative sample of about 60,000 homes to try and determine the unemployment rate of specific regions, earnings of those surveyed, hours the respondents worked, and many other demographic factors.
Example of a Job Market
The BLS publishes regular snapshots of the job market, titled "Employment Situation Summaries." According to the November 2023 report, total employment for non-farm payrolls rose by 199,000 for the month, and the unemployment rate—which is a lagging indicator—fell to 3.7%. Industries such as health care and government saw job gains during this time, as did manufacturing, due to return of workers from strikes. Employment in the retail sector fell.
How Big Is the U.S. Labor Market?
In October 2023, there were 168.3 million people in the civil labor force, a category that does not include active-duty military personnel, incarcerated individuals, farm workers, and government employees. As a proportion of the total population, this represented an employment participation rate of 62.8 percent.
What Does a Tight Job Market Mean?
Job markets are often referred to as being "tight." This means that there are more positions available than unemployed individuals willing to take them on. Conversely, when the unemployment rate is high but there are few job vacancies, the job market can be described as "slack" or "loose."
What Is the Job Vacancy Rate in the U.S.?
According to BLS, the job openings rate on the last business day of October 2023 was 5.3%, a slight decrease compared to the last month. Sectors that saw job decreases include health care and social assistance, finance and insurance, and real estate and rental and leasing.
The job openings rate is calculated by dividing the number of job openings by the sum of both filled and unfilled job, represented as a percentage.
The Bottom Line
The job market is a concept for understanding how employers seek employees and vice versa. It considers at the availability of jobs and workers, as well as other factors that can shape employment, such as competition for skilled workers or training requirements for employees. It's directly related to the unemployment rate, a metric that measures the number of people who aren't employed but are seeking to do so. Businesses, policymakers, and workers may all choose to follow news related to the job market, as it can be seen an important component of overall economic health.
