Written by Steven Hansen
I have two choices this month in my analysis of the BLS Job Openings and Labor Turnover Survey (JOLTS) :
- stay in the format of my past posts on JOLTS using only the headline seasonally adjusted data, and tell you we have a bad batch which is pointing to poor jobs growth to come; or,
- step back from the data, and show you that there are some serious issues with the seasonal adjustment methodology for the headline data.
For me, it is important to understand what is really going on – or my ability to provide accurate forecasts is diminished. Jobs openings in the BLS Job Openings and Labor Turnover Survey (JOLTS) can serve as a predictor of future jobs growth.
Taking a step back, it is well known I have issues with the seasonal adjustment methodology of the BLS. Take last month’s Jobs report which was a lot better than the headlines. On the graph below, the red line is the seasonally adjusted private non-farm month-over-month jobs growth, and the blue line is the non-adjusted jobs growth.
Consider that the jobs gains month-over-month for the last three Mays. May 2012 should have shown a seasonally adjusted private non-farm jobs growth around 170,000 – instead of the 82,000 headlined. My position is the poor employment numbers are the product of poor seasonal adjustment methodology for the last few month (this may change in the future).
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.
Note the big drop this month in JOLTS job openings (blue line) – the largest drop since January 2009 (note – we were in a recession then).
So, even though the JOLTS data is one month older than the current jobs data, JOLTS job opening trends are a valid forward employment indicator. JOLTS seasonally adjusted data is not forecasting good times.
This month non-seasonally adjusted data was used to look at the trend lines – and wtf, the data seems to fit in the historical channel – and this means JOLTS is continuing to predict jobs growth in the 2% year-over-year range.
The JOLTS hires rate also fell in this months report, while the separations rate remained steady. The separation rate is the percent of workforce which quit or was laid off. Likewise, the hire rate is the percent of the workforce hired. Remember these are seasonally adjusted numbers – and this chart below would logically suggest no jobs gains resulting from separations offsetting hires.
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. JOLTS is issued a month later than the jobs data – and loosely correlates against one month old data.
In conclusion, I have my radar running because of Europe and the USA cutting back on war spending. However, I see nothing in this set of data which suggests a degradation in employment dynamics.
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.