Vacancies per one unemployed person: how labour shortages feed through to interest rates and profits

The "vacancies per one unemployed person" indicator is the ratio of the number of open jobs to the number of people looking for work. It answers one question: who currently holds the stronger hand in wage bargaining, the worker or the employer. When the economy has more vacancies than jobseekers, the labour market is described as tight: hiring is still possible, but it costs more and takes longer. For an investor this is not social statistics but an early indicator of corporate costs, of inflation and, in turn, of the key rate.

What exactly goes into the numerator and the denominator

The main practical difficulty is that the numerator and the denominator are measured by different methods and therefore do not automatically match. Unemployment in Russia is measured by a labour force sample survey following the ILO methodology: a person counts as unemployed if they have no job, are looking for one and are ready to start. Vacancies, however, come from a different logic: they are either the demand for workers declared by employers and collected by the employment service, or data from surveys of organisations, or even commercial series from job sites, such as the ratio of CVs to vacancies on online platforms.

The consequence is simple: the level of the indicator on its own says little, and only the dynamics within a single series are comparable. Tightness calculated from applications to the employment service and tightness calculated from an online platform can diverge, because they describe different segments: the state channel captures blue-collar and frontline positions, while online platforms capture office and skilled jobs. TradeAlmanac does not publish its own series on vacancies and unemployment, so no numerical values are given in this article: they should be looked up in the primary statistical source, while this piece examines the mechanism through which they reach share prices.

How tightness turns into a figure in a company's report

The chain is short and stable. A shortage of staff strengthens the worker's position in pay negotiations. Wage growth outpaces productivity growth, so unit labour costs rise. From there the company faces a choice, and that choice shows up in its financial statements: either pass the costs on to prices or accept a squeeze on margins. Companies with pricing power can pass them on; those selling a standard product in a competitive niche have to absorb the squeeze.

Across the economy as a whole, the first path means inflation, to which the central bank responds with the policy rate. The rate changes two inputs into a share valuation at once: the cost of money in the discounting denominator and the yield on the risk-free alternative investment. That is why a tight labour market is indirectly also a story about OFZ and the entire debt market, not just about payrolls.

For an individual stock, what matters more than the macro total is the share of staff costs in the cost structure. Labour-intensive businesses — retail, construction, transport, food service, private services — feel the tightness earlier and more sharply. Capital-intensive ones — mining, metals, energy — react less, because their main lever lies in commodity prices and capital expenditure. This is checked not against headlines but against the expense lines in issuers' financial statements.

Why the indicator matters most at turning points

The most valuable property of vacancies is that they turn before unemployment does. When cutting costs, a company first freezes hiring, then stops renewing fixed-term contracts, and only as a last resort lays off its own staff. A fall in vacancies while unemployment is still low is therefore an early signal of cooling demand, one that unemployment itself will only show later. The opposite case, when vacancies recover while unemployment stays flat, is typical of the start of an upswing.

Hence the way to read it: look at the numerator and the denominator separately, not only at their ratio. The ratio can hold steady while both components shrink, and that is a completely different state of the economy from one in which both are growing.

Three pitfalls in interpretation

Step 1 — strip out seasonality. Construction, agriculture and resort services produce predictable intra-year waves. The correct comparison is with the same period of the previous year or with a seasonally adjusted series.

Step 2 — separate structural shortage from cyclical shortage. Vacancies and jobseekers may fail to find each other not because demand is strong but because of a mismatch in occupations and regions: lathe operators are needed in one place, while spare hands are available in another. This is a shift of the Beveridge curve — tightness looks high while the economy is sluggish, and interest rates cannot cure it.

Step 3 — check the denominator for demographics. If the labour force is shrinking, the ratio of vacancies to unemployed rises even when demand for labour is unchanged. Such a "record tightness" describes supply rather than business activity and tells you almost nothing about companies' revenue.

What to do with it in practice

Labour market tightness is useful as a frame into which corporate data can be placed. If staff costs are rising and margins are holding, the company has managed to pass them on to prices, which is an argument for its pricing power. If margins are being squeezed, the question shifts to the resilience of cash flow and hence to the ability to pay shareholders: see free cash flow yield and dividends based on cash flow, as well as the payout calendar and the dividends section. The flow of macro news and the release dates of statistics are easy to follow in the news and the events calendar, and definitions of terms can be found in the glossary.

Historically, it is precisely the combination of tight hiring with a sharp reversal of the credit cycle that has made recessions deep: employment is the last thing to turn, and by the time it deteriorates, the financial damage has already been done.