For two hours Tuesday, Wall Street analysts and the business press intently watched Federal Reserve chairman Ben Bernanke's testimony at the Senate Banking Committee for one thing and one thing only: a reaction to last week's surprisingly strong employment report.
The reaction never came because the question was never asked. So Fed watchers will continue to guess at the significance for policy of the unemployment rate's drop to 8.3 per cent in January. Many say the sharp move lower means the Fed will hold off on a third asset-purchase program.
In truth, the January jobs numbers probably didn't change the Fed's stance much, if at all. Mr. Bernanke's prepared testimony – in which he says "we still have a long way to go before the labour market can be said to be operating normally" – was word for word what he presented a week ago to the House Budget Committee. And although he didn't get a direct question on the 243,000-job gain in payrolls in January, Mr. Bernanke made clear he remains deeply concerned about the level of unemployment.
"The 8.3 per cent no doubt understates the weakness in the labour market in some broad sense," Mr. Bernanke said. While some employment indicators are improving, there are "a lot of people out of the labour force because they don't think they can find work," Mr. Bernanke said.
One of the reasons those people can't find work is because the employed are clinging to their current jobs at much higher rates than is typical for the United States.
A dynamic economy features a high level of labour turnover, or churn. There is very little of that right now. Data released Tuesday by the Labour Department shows 1.79 million people quit their jobs in December, 2011, compared with 1.73 million a year earlier. The "quits" rate will have to speed up significantly to get the unemployment rate closer to the 5.2 per cent to 6 per cent range that the Fed says is consistent with its mandate of maximum employment.
But like the surveys of payrolls and households, the Labour Department's monthly JOLT – Job Openings and Labour Turnover – report shows the U.S. economy is improving.
There were 3.4 million job openings in December, compared with 3.1 million in November and 2.9 million in December, 2010. (There were 4.4 million openings when the recession began in December, 2007.)
That means there is now one job listing for every four job seekers, an improvement from one-to-seven when U.S. unemployment peaked and the lowest since December, 2008.
However, while the rate of job openings is speeding up, the pace of hiring isn't. That suggests there's a structural element to the U.S.'s employment woes. "Factors such as mismatched skills continue to be frictions in the labour market," Barclays Capital economist Cooper Howes said in a research note.
Consider: companies grouped in the Laboru Department's "professional and business services" category hired 787,000 people in December, compared with 780,000 a year earlier. At the same time, companies in that group advertised 652,000 openings, a big jump from 503,000 the previous month and 609,000 in December, 2010.
These figures are fodder for those who say the U.S. has failed to train enough high-skilled workers to keep up with the demands of its most successful companies. President Barack Obama says education is a priority, and on Tuesday sought to emphasize his commitment to do more by hosting a science fair at the White House.
He will need to do more than that. As the accompanying chart from the OECD shows, the U.S. turns out surprisingly few graduates in science, technology, engineering and math, the so-called STEM jobs that correlate with high pay and high demand.