August 2012 JOLTS Saying Future Jobs Growth May Weaken

Written by Steven Hansen

The BLS Job Openings and Labor Turnover Survey (JOLTS) has been a good predictor of future jobs growth:

  • this August 2012 report is almost unchanged from last month, and and follows July’s data which Econintersect considered bad;
  • the number of PRIVATE jobs openings – which is the most predictive of the JOLTS elements – was statistically unchanged this month;
  • the growth trend line Econintersect sees in this index remains barely – and is now at the lower end of the growth channel.

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.

Jobs Openings from JOLTS (blue line, left axis) compared to BLS Non-farm Private (red line, right axis)

Jobs Openings (blue line in the above graph) remains in a long term upward channel that began coincident with the end of the recession – even though the jobs openings this month is unchanged.

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 is arguable from this graph.

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.

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 hires rate and the separations rate both grew in this report to 3.3%. 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 there were no jobs gains (as separations equaled 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. 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)

In conclusion, as this data is at the low end of the channel improvement channel – which suggests job growth may be softening in the months to come.

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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