In May, the country gained a net of 54,000 jobs, and in April we
gained 232,000. However, that is a very small fraction of the total
number of jobs that were actually created. It subtracts out the
number of jobs that were also destroyed in the month.
In any economic environment, there will always be jobs being
created and jobs being lost. The difference between them is what
gets the headlines. However, with a month’s delay we get to look a
little bit deeper and see not just the net number of jobs created
or lost, but the totals on each side of the equation. It also tells
how many job openings there were in the economy.
This is in the “Job Openings and Labor Turnover Survey” or JOLTS.
Today we got the JOLTS for April.
In March, the total number of job openings decreased by 4.9% to
2.972 million. This is after an increase in March of 3.3%. Relative
to a year ago, job openings are up 15.8%. On the other hand, there
were 13.75 million unemployed in April (rising to 13.91 million in
May) so that means there were 4.63 people looking for each
available job in April. While that is better than a year ago when
there were 14.88 million unemployed and 3.043 million openings, for
a ratio of 4.89 unemployed per opening, it still means it is tough
to find a job.
Still, that is a major improvement from the peak of that ratio of
6.94 in July of 2009. The job openings a year ago were also a bit
distorted by the hiring of temporary census jobs.
If just private sector jobs openings are considered, the number of
job openings fell by 4.9% on the month and is up 10.9% year over
year. That is very real progress, but we still have a long road
ahead of us in getting the country back to work. The ratio is still
more than twice what it was before the start of the Great
Recession, even if it is down 33.3% from its July 2009 peak.
The graph below shows the ratio of unemployed to job openings.
Clearly we have made some progress, but still have a long way to go
before we get back to “normal.”
In April, the total number of people finding new jobs fell 2.34%
from March to 3.972 million. On the other hand, the total number of
people losing their jobs (for whatever reason) fell by 1.63% to
3.743 million. The difference between the total hires and total
separations is 229,000, which is slightly below the 232,000 new
jobs reported in the May jobs report for April (after
revisions).
There is, however, always a little bit of statistical noise between
the two surveys. Relative to a year ago, the number of total new
hires is virtually unchanged (up 0.1%) and the total number of job
separations is up 2.77%. On just the private-sector side, the
number of people getting hired fell 2.55% on the month but is up
2.60% on the year, and the total number of job separations is down
2.24% for the month but up 3.35% year over year.
Total Government job openings were down 4.83% on the month, and are
down 51.3% from a year ago (when openings for temporary census jobs
were inflating the total). Government hires were up 0.77% on the
month and down 26.20% from a year ago. Government job separations
were up 5.90% on the month but down 3.69% year over year.
People leave their jobs for three reasons, they quit, they get
fired or laid off, or what the JOLTS report describes as “other”
(but is mostly retirements). When you dig down a little deeper, the
news gets better, particularly on a year-over-year basis. There is
a very big difference between getting a pink slip and telling your
boss to “take this job and ...” In the latter case, most people
already have another job lined up. If they don’t, it shows at least
some confidence in the economy and their ability to get another
job.
The graph below shows the number of job openings (yellow line), the
number of people being hired (purple line), the number of people
being laid off (or being fired or retiring, red bar) and the number
of people quitting (blue bar). The difference between the purple
line and the top of the stacked blue bar corresponds (roughly) to
the number of net jobs gained or lost in the economy in that month
as reported in the big employment report. Note that the yellow job
openings line is now at its highest point since the fall of
2008.
Unfortunately, the JOLTS survey only goes back to 2001, so it is of
limited usefulness in comparing where we are relative to coming out
of other recessions. One thing, though, that jumps off the chart is
that both the rate of new hiring and the total number of job losses
are well below historical averages. In other words, the key reason
so many people are out of work is a lack of hiring, not an
excessive amount of firing.
You may note that the number of job openings is always lower than
the number of hires. That is because the number of job openings is
a snapshot of the last day of the month, while the number of hires
is for the whole month. Thus a job opening that comes about in the
month and is filled within that month shows up in the hires, but
not in the openings.
Another thing to note is that during the worst of the economy
losing net jobs in late 2008 and early 2009, the total number of
layoffs soared much more than did the total number of job
separations. When it looked like the entire economy was coming
apart at the seams, the last thing you wanted to do was quit your
existing job. That is changing fairly dramatically.
The number of people who quoted that Johnny Paycheck song to their
bosses fell by 4.67% on the month and is down 3.95% year over year.
As a percentage of all people leaving their jobs, it fell to 50% in
April from 51% in March but is up from 48% a year ago. The decline
in the number (and percentage) of quits is a troubling sign, but
right now is still within the range of statistical noise. It is
not, however, a trend we want to see develop.
One thing that is a bit troubling is that the number of job
openings has risen much faster than the total number of new hires
(not so much this month, but the general trend). This also appears
to have happened following the 2001 recession as well, although it
was a slower process and not as dramatic. Since the JOLTS report is
relatively new, it is not possible to say if that relationship is
normal coming out of recessions, or if it really is different this
time.
Structural Unemployment?
There is a concern out there that some of the unemployment that we
are seeing in the economy is turning into structural unemployment
rather than just cyclical unemployment. That is not a view I happen
to share, but there are some serious people, including some of the
regional Fed Presidents who hold that view.
Structural unemployment occurs when there are mismatches between
the jobs available and the abilities and locations of the
workforce. A job opening for a nurse in Seattle does not do much
good for a construction worker who is out of work in Phoenix. I see
no particular reason why the skills mismatch would have increased
dramatically over the past two years.
The one area where there has probably been a big increase in skills
mismatches is in the construction industry. That industry has
traditionally been a source of relatively high-paying jobs for
those without a lot of formal education. Construction workers
account for about a quarter of all job losses in the Great
Recession, and they might have a particularly hard time finding
work in other parts of the economy.
However, if there were a big structural mismatch, there would be
some sectors of the economy where lots and lots of jobs are not
being filled, and where wages were escalating rapidly as employers
scrambled to find workers with the skills they need. With the
exception of investment bankers, hedge fund managers, professional
athletes and CEOs, I don’t see any sectors of the economy where
that is the case.
The other major evidence against the unemployment problem being
mostly structural is the very high unemployment rate among recent
college graduates. It is not going to be the lack of a college
degree that prevents them from getting a job, nor are they likely
tied down from owning a house. Normally they are the most mobile
segment of the population. Lack of aggregate demand seems a much
more plausible reason they can’t find jobs.
There is a good reason, though, why the geographic mismatch would
have increased. Historically, one of the great strengths of the
U.S., especially relative to Europe, has been the geographic
mobility of its labor force. Americans have always been a mobile
people. If there are no jobs in Boston, we historically have pulled
up stakes and moved to Austin. Europeans are far less likely to
move from Athens to Amsterdam in search of a new job.
However, moving often involves selling your current home. If you
are $50,000 underwater on your current place, it means that you
have to bring a check for $50,000 to the closing when you sell your
house (actually more when you factor in the realtor’s cut). If you
have been out of work for several months, chances are it is going
to be hard to scrape up that 50-large. Still, most of the high
unemployment levels we are seeing stems from cyclical unemployment
(a lack of aggregate demand) not from structural factors.
Discouraging Report - But a Little Stale
Overall, this report is discouraging, although it does deal with
April, not May or June data, and it thus a bit stale. Still, April
had a very strong BLS report, unlike the very weak one in May, but
the underlying numbers for April were soft, so the May report could
look very ugly.
The economy will always have jobs being created and jobs being
destroyed, and at much, much higher levels than the net number
between the two that everyone tends to focus on. In a healthy
economy, most people who leave their jobs will be doing so of their
own accord, because they think they can do better elsewhere, not
because the office is shutting down or drastically reducing the
work force.
The fall in job openings is bad news, as is the decline in the
percentage of people who leave their jobs voluntarily. We still
have far more people looking for work than there are jobs
available, and in April, that problem got worse not better,
although things are still better than a year ago, especially if you
back out the temporary census effect.
The overall level of job turnover is still very low. We do not have
a problem with people getting laid off. In fact, that figure is at
an all-time record low, although the record does not go back all
that far.
The problem is that relatively few new jobs are being created. That
means that people with jobs can feel pretty secure, but that those
who are out of work are -- for the lack of a more technical term --
screwed. The number of very-long-term unemployed should be a
national scandal, or at least something that people in Washington
DC cared about.
It is not really plausible to bring the long-term deficit under
control unless both the spending and revenue sides of the equation
are addressed. Those who insist that no taxes can be raised on
anyone, or even the spending that occurs through the tax code cut
(special credits and deductions) cannot really be considered
serious about deficit reduction.
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