The Beveridge Curve’s Predictive Power: Why Job Vacancy Types Matter for Monetary Policy

For decades, economists and policymakers have relied on the Beveridge curve—a graphical representation of the negative relationship between job openings and unemployment—as a quick gauge of labor market tightness.

• When job vacancies increase and unemployment falls, the labor market appears tight.
• When job vacancies decline and unemployment rises, the market has slack.

This simple relationship has long helped central banks judge whether the economy is near full employment and how much pressure the labor market might put on inflation. But in recent years, the Beveridge curve has shifted and flattened in ways that make it increasingly difficult to interpret.For a visual representation, see the second figure in this August 2023 On the Economy blog post.

A Changing Beveridge Curve

Historically, the Beveridge curve traced a stable pattern across business cycles: movements up and down along the same line, with only gradual changes over time. Since the mid-2010s—and especially after the onset of the COVID-19 pandemic—the data look very different. The number of job vacancies has climbed to record highs, while unemployment and hires from unemployment have changed little.

Under traditional models, this pattern would imply a dramatic decline in matching efficiency—the ability of firms and workers to find one another. But that explanation seems implausible. Recruiting technologies and online job platforms have improved, not deteriorated. Survey data also show that job searching among the employed remains strong.

So if the matching process hasn’t collapsed, what explains the sharp rise in job postings?

Two Types of Job Vacancies

A recent working paper by Anton Cheremukhin and Paulina Restrepo-Echavarría suggests a simpler answer: Not all job vacancies are created equal.See Anton Cheremukhin and Paulina Restrepo-Echavarría’s Federal Reserve Bank of St. Louis Working Paper, “The Dual Beveridge Curve” (2022-021F, revised September 2025). Firms post openings for different reasons. Some firms are trying to hire people who are unemployed. Other firms are trying to poach workers who already have jobs.

These two types of job vacancies have very different implications for the labor market:

• Vacancies aimed at unemployed workers create new employment opportunities and affect the unemployment rate.
• Poaching vacancies mostly reshuffle workers across firms without changing total employment.

If we lump these two types of vacancies together—as the official vacancy data do—changes in aggregate vacancies may not tell us much about labor market slack.

Reassessing Job Vacancy Data

A “dual-vacancy” model that separates the two types of job vacancies helps explain the puzzling data. When Cheremukhin and Restrepo-Echavarría estimate this model using U.S. labor market data from 1978 to 2024, two findings stand out:

• The post-2010 surge in aggregate vacancies is almost entirely due to poaching vacancies. (See the figure below.) Vacancies targeting unemployed workers are far fewer and much more stable.
• The connection between poaching vacancies and actual job-to-job moves is weak. Even as firms post far more poaching openings, the rate of job changes among employed workers barely increases. This suggests that many postings are not linked to hiring activity—a finding consistent with data on “ghost jobs,” or listings that remain open without immediate intent to hire.

Breaking Down Job Openings: Vacancies for the Unemployed vs. Poaching Vacancies

NOTES: Shaded areas represent the 90% confidence interval. Data are from 2000 to 2024.

SOURCE: Cheremukhin and Restrepo-Echavarría (revised 2025).

Implications for Monetary Policy

For monetary policymakers, these distinctions matter. The Federal Reserve and other central banks often use the vacancy-to-unemployment ratio—the V/U ratio—as an indicator of labor market tightness. In recent years, that ratio reached record highs, suggesting an overheated labor market and prompting concerns about wage pressures.

But if much of the rise in vacancies reflects poaching or ghost postings, the high V/U ratio may overstate true labor market tightness. Policymakers could infer there is more pressure on wages and prices than exists.

This perspective also may explain why unemployment fell only modestly and wage growth moderated faster than expected in recent years, even as vacancies remained elevated: Aggregate vacancy data overstated how strong demand was for unemployed workers.

A Segmented Labor Market

The broader lesson is that the labor market is segmented—not only among workers, but also among firms and their hiring strategies. Firms competing for already-employed workers respond to different incentives than do firms seeking to expand their workforces.

When the share of poaching vacancies is high, changes in aggregate postings may reflect turnover and replacement hiring rather than new job creation. In such environments, a decline in vacancies may have only a modest effect on unemployment, and a rise in vacancies may not signal overheating.

What Should Policymakers Watch?

If total vacancies are an unreliable measure, what indicators might better capture labor market slack?

One option is to focus on hires from unemployment—a direct measure of how quickly jobless individuals find work. Another method is to estimate the share of vacancies aimed at the unemployed—the type of postings most relevant for employment and inflation dynamics. A previous blog post showed how a reconstructed Beveridge curve, limited to unemployment vacancies, could be used to gauge whether the Fed could continue tightening in 2023 without risking an above-average increase in unemployment.

More generally, interpreting vacancy data should involve understanding the types of workers that firms are trying to hire. The same number of job openings can reflect very different labor market conditions depending on their composition.

Rethinking the Beveridge Curve

Once we separate vacancies by type, the Beveridge curve regains its traditional shape. The apparent breakdown comes not from a sudden loss of efficiency but from changes in the composition of vacancies.

This insight reframes recent labor market debates. The rise in vacancies since the mid-2010s, and especially after the pandemic, reflects a growing focus on poaching rather than a general shortage of labor. Aggregate vacancy measures, which mix these two motives, have become a noisy and potentially misleading signal.

Conclusion

Job vacancies once served as a reliable barometer of labor market tightness. Today, they tell a more complicated story. A large and rising share of job postings target already-employed workers or represent inactive listings. As a result, the vacancy-to-unemployment ratio now overstates how tight the labor market truly is for unemployed workers.

For monetary policymakers, the implication is that vacancies alone are no longer a dependable guide. Understanding labor market conditions requires looking beyond the raw number of job openings to the nature and purpose of those openings. The Beveridge curve still matters, but only when we recognize that not every vacancy represents a real opportunity to hire.

Notes

1. For a visual representation, see the second figure in this August 2023 On the Economy blog post.
2. See Anton Cheremukhin and Paulina Restrepo-Echavarría’s Federal Reserve Bank of St. Louis Working Paper, “The Dual Beveridge Curve” (2022-021F, revised September 2025).