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.
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 health of the overall economy.
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. 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
According to the U.S. Department of Labor, Bureau of Labor Statistics total employment for non-farm payrolls rose by 304,000 for January 2019, and the unemployment rate (a lagging indicator) bumped up to 4.0%. Industries such as leisure and hospitality, construction, health care, and transportation and warehousing all saw job gains during this time.