July 2014 JOLTS Still Projecting Good Jobs Growth
Written by Steven Hansen
The BLS Job Openings and Labor Turnover Survey (JOLTS) can be used as a predictor of future jobs growth, and the predictive elements show that the jobs opening growth rate continues to show strength - and the rate of growth is accelerating.
- the number of unadjusted PRIVATE jobs openings – which is the most predictive of the JOLTS elements – growth rate was improved from last month, and up from 18.9% to 21.5% from one year ago. The unadjusted non-farm private jobs opening rate (percent of job openings compared to size of workforce) improved marginally 0.1% to 3.5%. Overall, the data is predicting an improvement of employment growth, and is projecting an improvement in the rate of growth.
Unadjusted Private Jobs Openings from JOLTS - Year-over-Year (blue line) compared to Change from Last Month (red line)
- Unadjusted PRIVATE hires year-over-year growth decelerated marginally month-over-month and PRIVATE separations also decelerated marginally month-over-month – in theory meaning the employment situation is about the same. However, this portion of the JOLTS report has shown little predictive ability.
- The market expected seasonally adjusted jobs openings at 4.550 million (M) to 4.740 M (consensus 4.705 M) versus the headline 4.673 M
The relevance of JOLTS to future employment is obvious from the graphic below which shows JOLTS Job Openings leading or coincident to private non-farm employment. JOLTS job openings are a good predictor of jobs growth turning points.
Seasonally Adjusted Private Jobs Openings from JOLTS (blue line, left axis) compared to BLS Non-farm Private (red line, right axis)
The graph below uses year-over year growth comparisons of non-seasonally adjusted non-farm private BLS data versus JOLTS Job Openings – and then compare trend lines. JOLTS is suggesting that the rate of improvement the jobs situation will not change (either for the worse or for the better).
Year-over-Year Change – Seasonally Jobs Openings from JOLTS (blue line, left axis) compared to Unadjusted BLS Non-farm Private (red line, right axis)
The JOLTS Unadjusted Private hires rate (percent of separations compared to size of workforce) was down 0.1 to 4.2 – and the separations rate (percent of separations compared to size of workforce) was up 0.3 to 3.9. Separations are the workforce which quit or was laid off. Likewise, hires are the workforce hired.
Seasonally Adjusted Hires (blue line) and Seasonally Adjusted Separation Rates (red line) – Non-Farm Private
However, please note that Econintersect has not been able use the hire rate or the separation rate (or a combination thereof) to help in understanding future jobs growth. A Philly Fed study agrees with Econintersect’s assessment. JOLTS is issued a month later than the jobs data – and correlates against one month old data. The data in the below chart shows that the JOLTS data is turning at the same points – but the JOLTS data is released one month later making this a lagging indicator.
Hires less Separation Rate (blue line, left axis) compared to Non-Farm Private BLS Non-farm Private (red line, right axis)
Caveats on the Use of JOLTS
This data series historically is very noisy which likely is a result of data gathering issues and/or seasonal adjustments. Therefore this series must be trended to provide any understanding of the dynamics. One of two months of good or bad data are not predictive.
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