Written by Steven Hansen
The BLS Job Openings and Labor Turnover Survey (JOLTS) has been a good predictor of future jobs growth:
- the number of PRIVATE jobs openings – which is the most predictive of the JOLTS elements – was up 1.3% from last month, and 6.5% higher than one year ago;
- after the growth trend line in this index has dropped below the existing trend channel last month, it rebounded this month to barely enter the lower end of the old trend channel.
- hires and separations improved in lockstep nullifying each other.
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.
Private Jobs Openings from JOLTS (blue line, left axis) compared to BLS Non-farm Private (red line, right axis)
Private Jobs Openings (blue line in the above graph) have dropped below the upward channel that began coincident with the end of the recession.
Although the JOLTS data is one month older than the current jobs data, JOLTS job opening trends are a valid forward employment indicator. The short term trend seems to be a continuation of relatively flat jobs growth.
However, the trend is much clearer using non-seasonally adjusted non-farm private BLS data to look at the trend lines – and this means JOLTS is continuing to predict jobs growth in the 2% year-over-year range – however this trend appears to have a slight downward bias.
Year-over-Year Change – Jobs Openings from JOLTS (blue line, left axis) compared to Unadjusted BLS Non-farm Private (red line, right axis)
The JOLTS Private hires rate and the separations rate both declined 0.2 points in this report to 3.5% and 3.4% respectively. 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 jobs gains (as separations were less than hires).
Hires (blue line) and 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.
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.