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November 2012 JOLTS Suggests Slowing Jobs Growth

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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 0.1% from last month, and 13.5% higher than one year ago;
  • with this month’s data, the trend is no longer improving – and is flat (same rate of growth).
  • PRIVATE hires declined month-over-month and PRIVATE separations increased – in theory meaning the employment improvement is trending down.
  • The predictive part of the data is saying employment should be less good in the coming months.

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)

Although the JOLTS data is one month older than the current jobs data, JOLTS job opening trends are a valid forward employment indicator.

The graph below uses year-over year comparisons of non-seasonally adjusted non-farm private BLS data versus JOLT’s Job Openings – and then compare trend lines.  Even with this month’s improved year-over-year JOLT’s data – it appears JOLTs is predicting less good jobs growth.

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 declined 0.8% and the separations rate grew 1.9% month-voer-month. 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.  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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