How SMBs Are Hiring in a Low Unemployment Environment

In October 2009, the US unemployment rate peaked at 10%. Falling ever since, today it stands at 4%. Among many other things, this means it’s harder for employers to find workers. There just aren’t as many people waiting around looking for jobs right now. How have they responded?

Figure 1 gives a partial answer: They’re giving prospective applicants much more detail about openings. The figure shows that the average length of job descriptions has been increasing over time, as unemployment falls. The average post is now almost 70% longer than in early 2016. This can help improve candidates’ understanding of the position and make sure the company can find the right fit among applicants.

Figure 1. Posts get longer as unemployment gets lower

But, of course, by 2016 unemployment was already down below 5%. So if we really want to understand how employers respond to tight labor markets (that is, low unemployment) then we’re better off looking at metropolitan areas, and comparing cities with high and low unemployment. That’s what we do here.

We focus on 4.5 million posts between early 2016 and early 2018, and combine these with the local unemployment rate. This can tell us much more than just looking at changes over time because some cities’ unemployment is as low as 1.7% (hey Honolulu!), while other cities have unemployment as high as 18% (much higher than the US national average has been in recent years).

We’re broadly interested in how employers’ behavior depends on unemployment, so we looked at a bunch of characteristics and checked how all of them relate to local unemployment. A visual overview of the results is given in Figure 2.

Figure 2. How low unemployment affects job description characteristics

So what should you take away from Figure 2? Lots of good news.

As unemployment falls, employers write longer job descriptions that tend to identify more skills needed for the position. As we noted above, this means that companies are more clear and specific about what they need, which helps prospective applicants figure out whether this is the right job for them and makes it easier for employers to get the workers they need.

We also see that employers become more likely to list the salary for the position, again helping prospective applicants realistically assess whether the job is appropriate for them, and there’s some evidence that these salaries are higher (which is pretty obviously good for workers).

Employers also post more entry-level jobs. This is important because a common complaint during the recession was how hard it was to break into the labor market, and we have good evidence that workers graduating and entering the labor market during recessions are those who were hardest hit by them. We now see more opportunities for these early career workers, which is a big help in the long run.

How big are these effects? What does this mean for the national economy? How does this information help us think about the (seemingly still ongoing) economic recovery? Table 1 answers that. We use the evidence assembled from comparing different MSA’s, and we calculate what those results mean for a decrease in unemployment from 10% (October 2009) to 4% (June 2018). This is what an economic recovery looks like.

Table 1. What changes when we go from 10% unemployment to 4%?

Posts- Get 8% longer (more detail(
- Specify 4.2 more skills (more clear)
Openings- Are 17% more likely to be entry level
Salaries- Are listed 18% more often
- Are 7.7% higher

As you can see from the table, that 6 percentage point decline in unemployment means a lot for the national economy. Posts get much more detailed (8% longer with 4.2 more skills specified), which improves the fit between workers and jobs. Posts are 17% more likely to be for entry-level workers. Salaries are listed 18% more often, and when listed they’re over 7% higher.

So how are employers responding to the current low unemployment environment? They’re being more detailed and more specific, becoming more open towards early career talent, and paying more. This is good news for workers and good news for the economy as a whole.

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Mitch Downey is an Assistant Professor of economics at the Institute for International Economic Studies in Stockholm and a former contributor to the ZipRecruiter blog.

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