Job Openings And Labor Turnover: Clues To The Business Cycle – Seeking Alpha

By Jill Mislinski

The latest JOLTS report (Job Openings and Labor Turnover Summary), with data through December, is now available. From the press release:

The number of job openings was little changed at 7.6 million on the last business day of January, the U.S. Bureau of Labor Statistics reported today. Over the month, hires and separations were little changed at 5.8 million and 5.6 million, respectively. Within separations, the quits rate was unchanged at 2.3 percent and the layoffs and discharges rate was little changed at 1.1 percent. This release includes estimates of the number and rate of job openings, hires, and separations for the nonfarm sector by industry and by four geographic regions. The release also includes 2018 annual estimates for hires and separations. The annual number of hires at 68.9 million and the annual number of quits at 40.1 million increased in 2018. The annual number of layoffs and discharges at 21.9 million edged up in 2018.

Revisions and Methodology Change

Job openings, hires, and separations have been revised to incorporate the annual updates to the Current Employment Statistics employment estimates and the JOLTS seasonal adjustment factors. Additionally, a new methodology for item imputation has been implemented. See the revision section at the end of this release for more information.

The first chart below shows four of the headline components of the overall series, which the BLS began tracking in December 2000. The time frame is quite limited compared to the main BLS data series in the monthly employment report, many of which go back to 1948, and the enormously popular Nonfarm Employment (PAYEMS) series goes back to 1939. Nevertheless, there are some clear JOLTS correlations with the most recent business cycle trends.

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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 three and a half years, the moving average for openings has been above the hires levels as seen in the chart below.

JOLTS Overview

For comparison, here is the monthly BLS Employment Situation Summary charted with JOLTS data:

JOLTS Overview

A Population-Adjusted Perspective on JOLTS

The 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.





Where Are We Now in the Business Cycle?

Based on the six-month moving averages, we can see that:

  • The Openings are at its record high and the moving average has been above the hires levels for the last three-plus years.

  • Hires are above their pre-recession peak and near their all-time high.

  • Quits are above their levels of last two recessions and near their all-time high.

  • The Layoffs and Discharges series is near its all-time low.

The Trend in Quits

To reiterate a previous point: Increases in Quits suggest employment flexibility. Quits tend to be inversely correlated with Layoffs & Discharges, which are associated with business cycle weakness. Following the last recession, Quits began increasing in 2010, and the rate accelerated in 2013 and has continued to rise. Layoffs & Discharges fell post-recession and leveled out for a few years and has continued its decline.

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Quits versus Layoffs

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.

Original Post

Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.


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