Jobs And Labor Turnover: Latest Clues To The Business Cycle
Doug Short | Sep 10, 2015 12:13AM ET
The latest JOLTS report (Job Openings and Labor Turnover Summary), data through July, is PAYEMS ) series goes back to 1939. Nevertheless, there are some clear JOLTS correlations with the most recent business cycle trends.
The chart below shows the monthly data points for four of the JOLTS series. They are quite volatile, hence the inclusion of six-month moving averages to help identify the trends. For the last three months, there have been more job openings than hires as seen in the chart below.
The most closely watched series is the one for Total Nonfarm Job Openings, the blue line in the chart above. The moving average peaked in mid-2007 and began rolling over to its trough a couple of months after the Great Recession ended. The Hires series is roughly similar in its trend. Quits are also trending higher; they are generally thought to show an economy that supports the flexibility to leave or change jobs. In contrast, Layoffs and Discharges, the red line, were somewhat inversely correlated to the other three.
h3 A Population-Adjusted Perspective on JOLTS/h3The chart above is based on the actual numbers in the JOLTS report. A better way to view the numbers is as a percent of Nonfarm Employment, which essentially gives us a population-adjusted version of the data. Here is that adjustment for four of the JOLTS series. Note that the vertical axis for each is optimized for the high-low range to facilitate an understanding of the individual trends.
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Based on the six-month moving averages, we can see that:
- The Openings percent has reached its highest level since the start of the series in December of 2000 and have been above hires levels for six months.
- Hires have leveled off over the last few months and remain below the 2005 peak.
- Quits are a bit above the trough between the last two recessions, and have leveled out.
- The Layoffs and Discharges series is off its historic lows and has trended a bit higher in recent months.
To reiterate a previous point: Increases in Quits suggest employment flexibility. Quits tend to be inversely correlated with Layoffs and Discharges, which are associated with business cycle weakness. Following the last recession, Quits began increasing in 2010, and the rate accelerated in 2013. The trend has leveled out in recent months. Layoffs and Discharges trended downward and have been relatively stable since late 2013. The trend in the latest months is slightly off its lows.
It would, of course, be excellent if we had historical JOLTS data stretching back through several business cycles. But alas we do not.
The JOLTS reports will be interesting to watch in the months ahead. But the volatility of the data, which is also subject to revisions, encourages caution in taking the data for any given month very seriously.
by Jill Mislinski
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