Written by Steven Hansen
The BLS Job Openings and Labor Turnover Survey (JOLTS) has been a good predictor of future jobs growth:
- after many months strong improvement, we now have three months of mediocre data.
- the number of PRIVATE jobs openings – which is the most predictive of the JOLTS elements – was up a statistically insignificant 0.1% from last month, and up 1.8% from one year ago;
- PRIVATE hires grew month-over-month and PRIVATE separations also increased – in theory meaning the employment situation rate of change is static.
- The predictive part of the data is saying employment situation is not improving.
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 growth comparisons of non-seasonally adjusted non-farm private BLS data versus JOLT’s Job Openings – and then compare trend lines. JOLTs is continuing to predict 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 (percent of hires compared to size of workforce) increased from 3.2% to 3.3% and the separations rate (percent of separations compared to size of workforce) was unchanged at 3.2% month-over-month. Separations are the workforce which quit or was laid off. Likewise, hires are the workforce hired. Remember these are seasonally adjusted numbers – and this chart below would logically suggest a static jobs situation (as separations and hires were approximately equal).
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.