There are about 1 million more job openings than people looking for work

Employers in the U.S. face an interesting challenge ahead – how to fill nearly 10 million job openings with about a million fewer workers than there are positions available.

How successful they are will go a long way in determining whether the recent strong of outsized job gains can continue.

The Department of Labor reported Friday that there are some 8.7 million potential workers who have been looking for jobs and are counted among the unemployed. At the same time, job placement site Indeed estimates there are about 9.8 million job vacancies as of July 16, or just a few days after the government’s sample period for the monthly numbers.

Companies have been using a variety of techniques, including signing bonuses, higher salaries and flexible working arrangements, to entice people. That likely will have to continue as the Covid-19 pandemic changes the jobs market, perhaps permanently.

“This is one of the most complex labor markets in recent memory,” said Scott Hamilton, global managing director for the human resources and compensation consulting practice at Gallagher, a global insurance brokerage, risk management and consulting firm. “One of the biggest factors is employers are essentially having to buy back job applicants’ Covid lifestyle.”

A just-released survey from Gallagher shows the extent to which employers are willing to go to entice workers in the pandemic era.

Some 41% of employers responding said they are offering enhanced benefits. One such enticement: 19% say they are offering pet insurance, a perk that is expected to rise to 27% of companies in the next two years.

They’re also providing discount programs, legal services and identity theft protection, though 71% of respondents said medical and pharmacy benefits remain atop the most important added benefits they’re offering.

Job growth has been surging in recent months, with July’s number, reported Friday, showing an addition of 943,000, the biggest spike since August 2020. That came on top of respective gains of 938,000 and 614,000 in the previous two months, for an impressive three-month average of 832,000.

Still, there’s a lot more work to be done, as there are still 6.1 million fewer Americans working now than in February 2020, just before the pandemic hit.

“Labor force participation is flat, so this is just job regrowth,” Hamilton said. “All the big jobs numbers are great, but we’re still growing into lost jobs. So it’s going to get slower as folks are coming back into the market with changed expectations and changed lifestyles.”

One important factor looming ahead is the September expiration of enhanced unemployment benefits.

Indeed reports that in past months, many workers had refrained from taking jobs they didn’t want because they had enough financial cushion to wait. Even with concerns about the virus, the need to get back to work will start to grow.

“Money issues seem to be a rising concern among unemployed workers not searching urgently” Nick Bunker, Indeed’s economic research director, said in a recent report. “More of them said the end of [unemployment insurance] benefits or financial cushions running low were major milestones that could prompt them to take a job.”

Enhanced benefits, child care issues and fear over the pandemic and, now its delta variant, have long led the list of things keeping people out of their jobs. Each could continue to play a role, though renewed precautions over the delta strain are likely to become front and center.

“They’re all important, they’re all interconnected,” said Joseph LaVorgna, chief economist for the Americas at Natixis and former chief White House economist during the Trump administration. “So I guess it’s dependent on what happens in the fall. Are schools going to reopen? If they’re not going to reopen, if people are limited in their ability to send their kids to school, some people are going to be hard-pressed to go back to the labor market.”

July’s nonfarm payrolls report provided a raft of good news across a variety of areas.

While the total employed is well below its pre-pandemic level, it did improve by 1.04 million. Labor force participation inched up, at least, to 61.7% as the unemployment rate slid to 5.3%. And a gauge that measures the employment level compared to the total working-age population – a metric critically important to Federal Reserve policymakers – rose to 58.4%, its best since March 2020 and now just 2.7 percentage points below its peak.

Heading into the end of the summer, the unusual burden of convincing workers to fill a historically high level of job openings will be critical for the economy.

“We have a lot of cloudy skies, and that’s largely tied to delta and delta-plus,” said Beth Ann Bovino, chief U.S. economist at S&P Global Ratings. “There’s still a lot of moving parts. I wouldn’t call the game over yet.”