JOLTS: Record Job Openings vs. Hires, Two Interpretations
The BLS Job Openings and Labor Turnover (JOLTS) shows openings reached a series high of 7.1 million.
On the last business day of August, the job openings level reached a series high of 7.1 million. The job openings rate was 4.6 percent. The number of job openings was little changed for total nonfarm, total private, and government. Job openings increased in federal government (+15,000). The number of job openings was little changed in all four regions.
The number of hires in August reached a series high of 5.8 million. The hires rate was 3.9 percent. The number of hires was little changed for total nonfarm, total private, and government. Hires were little changed in all industries and in all four regions.
Total separations includes quits, layoffs and discharges, and other separations. Total separations is referred to as turnover. Quits are generally voluntary separations initiated by the employee. Therefore, the quits rate can serve as a measure of workers’ willingness or ability to leave jobs. Layoffs and discharges are involuntary separations initiated by the employer. Other separations includes separations due to retirement, death, disability, and transfers to other locations of the same firm.
The number of total separations was little changed at 5.7 million in August. The total separations rate was 3.8 percent. The number of total separations was little changed for total private and for government. Total separations increased in state and local government education (+20,000). Total separations was little changed in all four regions.
The number of quits was little changed in August at 3.6 million. The quits rate was 2.4 percent. The number of quits was little changed for total private and for government. Quits increased in wholesale trade (+24,000) but decreased in professional and business services (-82,000). The number of quits was little changed in all four regions.
The number of layoffs and discharges edged up to 1.8 million in August (+176,000). The layoffs and discharges rate was 1.2 percent. The number of layoffs and discharges edged up for total private (+158,000) and was little changed for government. Layoffs and discharges increased in professional and business services (+117,000) and in state and local government education (+20,000), but decreased in health care and social assistance (-35,000). The number of layoffs and discharges increased in the West region.
Net Change in Employment
Large numbers of hires and separations occur every month throughout the business cycle. Net employment change results from the relationship between hires and separations. When the number of hires exceeds the number of separations, employment rises, even if the hires level is steady or declining. Conversely, when the number of hires is less than the number of separations, employment declines, even if the hires level is steady or rising. Over the 12 months ending in August, hires totaled 67.0 million and separations totaled 64.7 million, yielding a net employment gain of 2.4 million. These totals include workers who may have been hired and separated more than once during the year.
- The comparison that's most critical here is the number of unemployed actively looking for work, a number that is also compiled by the Labor Department and which stood at 6.234 million in August before moving sharply lower in the September employment report to 5.964 million. This gap between job openings and job seekers, which first opened up earlier this year, is hard evidence that labor is scarce.
- Other readings in today's JOLTS report for August include a modest gain in the number of hires, to 5.784 million vs July's 5.713 which also is far below the number of openings. The number of quits are closely tracked in this report as an early indication of wage inflation. But there's no indication that workers are being pulled to higher paying jobs as quits slipped in the month to 3.577 million from July's 3.608 million.
- Jerome Powell concedes that it's a mystery why wages haven't been going up very much as demand for labor grows and the supply of labor declines.Yet sooner or later, the law of supply and demand is bound to assert itself, at least this is the risk that the Fed is guarding against in its rate-hike regime.
Late Cycle vs Mystery vs Sooner or Later
- Fed chair Jerome Powell is mystified.
- Econoday proposes sooner or later wages will jump due to supply and demand.
- Rosenberg says It's "Classic Late Cycle".
The chart does not support "classic late cycle" as we did not see this behavior ahead of the last two recessions. But the data series does not go back that far.
That said, it is pretty clear we are very late cycle. I suggest that the "mystery" will be resolved, but not in the manner that Powell and Econoday expect.
Mike "Mish" Shedlock.