# Why are vacancy rate and unemployment rate negatively correlated?

Why is this the case?

Since Vacancy rate is defined as following,

let $A,Q,U$ denote number of vacancies in the economy, labor force, unemployed respectively.

$$\frac{A}{A+Q-U}$$

Here we can see that if unemployed increase vacancy rate would go up?

Why is there a negatively correlation then? Take the beveridge curve as an example :

https://en.wikipedia.org/wiki/Beveridge_curve

• I have no idea what you are asking here. Maybe rephrase the question. Nov 1, 2016 at 22:05
• Are you asking 'why is unemployment lower when job vacancies are higher?'. Unemployed people are people are looking for work. When you increase the thing that they are looking for (work), there will be less of them. Nov 1, 2016 at 22:08

## 2 Answers

Adopting your notation, the vacancy rate at any given time is defined as $A/Q$. There is no mechanical relationship between the unemployment rate $U/Q$ and vacancy rate (A/Q).

They are negatively related because when vacancy rate is high, it means there are many unfilled job openings, and they are unfilled probably because most people already have a job, thus lower unemployment rate. And vice versa.

The number of vacancies does not change with U. It is the proportion that will change. In other words A will not change because U increases, but the ratio will go up.