(What’s Left of) Our Economy: Murky Jobs Signals from the New JOLTS Report

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BLS, Bureau of Labor Statistics, Federal Reserve, healthcare services, Janet Yellen, Jobs, JOLTS, recovery, subsidized private sector, turnover, {What's Left of) Our Economy

Economy-watchers just got another reminder today of how difficult it remains to figure out how healthy the current recovery is – from the data on employment turnover released by the Labor Department’s Bureau of Labor Statistics (BLS). The biggest surprise they delivered concerned the numbers of job openings reported (preliminarily) for February in the economy’s subsidized private sector.

Whereas the last few months of BLS data indicate that hiring in industries like healthcare services (which are heavily dependent on government support) hasn’t been quite so outsized as over the last decade, the new job turnover numbers (commonly known by their acronym JOLTS) suggest that they’re still punching above their weight.

If you think – as you should – that the real private sector should flat-out dominate job creation because it’s the economy’s leader in productivity and innovation, that’s not such a great development.

For the first three months of this year, the subsidized private sector accounted for 18.57 percent of the 533,000 total net new jobs America created. During the first three months of last year, this figure was 21.26 percent. These numbers will be revised several times more, but so far they signal that subsidized private sector jobs gains have lost some of their relative steam. (For more on the robust hiring in these industries during the current recovery, see this recent post.)

But the job turnover data appear to be sending the opposite message. Here we only have statistics going through February, and they’ll be revised down the road, too. But for the first two months of this year, 19.38 percent of the 11.368 million total job openings have come in the subsidized private sector. For the first two months of 2016, that figure was only 17.76 percent. In fact, the 1.138 million job openings estimated in the subsidized in February were the highest monthly total ever in absolute terms. (This data series started in 2000.)

To be sure, the subsidized private sector’s share of total job openings this year is a little below the levels that have held for most of the recovery. (See this post for more detail.) But its year-on-year rise is tough to square with the relative decline in actual job creation.

Another noteworthy result found in today’s job turnover report: The decline of retail job opportunities comes through plain as day. It’s not that the sector, whose bricks-and-mortars segment is under such tremendous pressure from on-line shopping, isn’t reporting any job openings at all. In fact, at 541,000 in February (on a preliminary basis), they were on the low end but still respectable by the standards of the last few years.

Look at the year-on-yer change, however, and you can see the retail employment problem. Reported job openings during January and February combined were down nearly ten percent. Those kinds of drops haven’t been seen since early in the recovery, in 2010.

These employment-related developments stand in especially stark contrast to the Federal Reserve’s apparent conclusion that the economy is just about fully recovered, and that the central bank’s new priority is sustaining “what we have achieved,” as chair Janet Yellen declared yesterday. This approach of course entails continuing to raise interest rates gradually, and reducing the immense amount of bonds the Fed bought as part of its stimulus program. Here’s hoping that the Fed’s confidence more accurately reflects the true state of the economy than these latest figures.

(What’s Left of) Our Economy: New Data Showing the Labor Market Still Needs Some (Positive) JOLTS

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Jobs, JOLTS, Labor Department, labor market, Obama, recession, recovery, Trump, turnover, {What's Left of) Our Economy

Although today’s government statistics on turnover among American workers lag reality by two months, they’re still worth looking at because they fill in more crucial details about the state of the U.S. employment scene as the Obama years draw to a close, and how it’s changed. And the main message sent by these so-called JOLTS numbers? Despite some very recent improvement, the country’s job market still features historically high levels of (a) private sector jobs and job openings that shouldn’t really be described as private sector, and (b) jobs in low-wage parts of the economy.

According to these new figures from Labor Department, American employers said their companies had openings for 5.522 million workers in November. (These numbers are still preliminary.) Of these, fully 20.28 percent could be found in what I call the economy’s subsidized private sector – industries where levels of activity, and therefore employment, depend heavily on government funding. (Health-care services is the leading example.) Openings in the “real” private sector – where activity is driven largely by market forces, and therefore more accurately reflects the economy’s underlying strengths or weaknesses, amounted to 69.76 percent of the total.

These results are better than those for November, 2015. A statistical year ago, that subsidized private sector comprised 21.41 percent of 5.198 million total reported job openings. And only 69.49 percent of such opportunities were reported for the real private sector. Moreover, these improvements have slowly been emerging over the last year.

The nation has also seen progress on this front going back to the start of the current economic recovery, in mid-2009. That June, subsidized private sector job openings stood at 22.28 percent of all reported openings, and their real private sector counterparts came in at just 64.25 percent.

Yet it’s also clear that the American job market hasn’t returned to normal levels – at least if “normal” is defined as its state on the eve of the Great Recession, at the end of 2007. Back then, the subsidized private sector generated only 18.31 percent of all reported job openings, and the real private sector’s share was 71.74 percent.

Somewhat more discouraging trends can be seen in the economy’s low-wage sectors – notably retail; leisure and hospitality; and the poorly paying portions of the overall high-wage professional and business services sector. (My figures for the latter are extrapolations based on their share of actual professional and business services employment, because they’re not explicitly reported in the JOLTS statistics.)

Job openings in these low-wage industries represented 32.58 percent of all openings in November, the Labor Department reported this morning. As with subsidized private sector openings, this share has been slowly trending down in recent months, and certainly from November, 2015 levels (33.49 percent).

But when the current economic recovery began, in mid-2009, the low-wage sectors produced only 28.38 percent of all job openings. And when the last recession began, in late 2007, their share was 31.94 percent – still smaller the most recent results.

It’s now more than seven years since this recovery began. Will a President Trump be able to give it the jolt it needs and that so many American voters clearly want? Keep watching the JOLTS reports for valuable insights into the emerging answer.

(What’s Left of) Our Economy: This JOLTS Report Won’t Likely Jolt the Fed

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Employment, Federal Reserve, interest rates, Janet Yellen, job openings, Jobs, JOLTS, turnover, {What's Left of) Our Economy

It’s time again for the monthly JOLTS report – for July – an occasion eagerly anticipated by the economics, business, and investing worlds because these data on turnover in American employment are known to be among Fed Chair Janet Yellen’s favorite measures of the labor market’s health. As a result, they’re likely to play a big role in her decision on raising interest rates – which could come next week. This latest edition leaves one recovery-era story intact – regarding the outsized importance of low-wage jobs during this long but weak expansion). But another trend – the prominence of subsidized private sector positions – took something of a hit.

The JOLTS data track how many Americans are being hired and leaving their jobs, the reasons for the departures (voluntary or involuntary), and the numbers of job openings posted by employers each month. I focus on the openings, since they say the most about what employers are seeking, and therefore which sectors of the economy look to be the most robust,at least in terms of employment-creating power. And as known by RealityChek regulars, the share of openings accounted for by low-wage sectors has risen steadily during this recovery.

In July, low-wage businesses – in retail, leisure and hospitality, and the low-pay sub-sector of the generally high-paying professional and business services sector – were responsible for 32.91 percent of all job openings companies said they posted. That’s not a record for the recovery, but it’s not far off. (Also, it’s only preliminary.) Moreover, it’s about a full percentage point higher than the 31.90 percent final figure for June, which was downwardly revised from 31.99 percent.

For comparison’s sake, when the last recession began, in December, 2007, this figure was 31.94 percent. When the recovery began, in June, 2009, it had sunk to 28.38 percent. Maybe this partly explains why Americans are so down on the economy even though it’s officially been growing for more than seven years?

The subsidized private sector consists of those industries where levels of activity (including hiring) are determined largely by government decisions, even though they aren’t formally government-owned. Healthcare services are the leading example. Just as they’ve spearheaded job creation during the recovery, they’ve also generated a disproportionate share of jobs openings recorded by the JOLTS reports. In July, the number was 18.36 percent.

That’s not only much lower than the June figure of 19.97 percent (which was revised up from 19.90 percent). It’s nearly as low as it stood at the recession’s onset (18.31 percent). Yes, when the recovery began, subsidized private sector jobs accounted for 20.31 percent of all announced job openings. But at that time, American employment creation was still deeply recessed — to the point at which healthcare services in particular were practically the only game in town.

Since the Fed says it’s interest rate decision will be determined mainly by the economic data as it comes in, and since recent indicators for the U.S. economy have rarely been more confusing, even the central bankers may not know what they’re going to do when they meet next week. But if the above JOLTS internals shape their conclusions much, bet on yet another “Hold.”

(What’s Left of) Our Economy? New JOLTS Data Provide Little Visibility on Jobs

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Employment, Federal Reserve, Great Recession, Janet Yellen, job openings, JOLTS, low-wage jobs, recovery, turnover, wages, {What's Left of) Our Economy

I’m not sure why the economics and investment world seems pretty uninterested in the new figures released this morning on labor turnover in the U.S. economy. After all, as RealityChek regulars know, these are among the favorite labor statistics of prominent labor economist – and Federal Reserve Chair – Janet Yellen. And she has a lot to say about how low or high interest rates will be, and therefore about how vigorous or weak the current historically feeble recovery will become. Maybe it’s the dog-days-of-August syndrome?

What I am sure of is that the level and makeup of the job openings reported in the new “JOLTS” data leave plenty of room for debate over a key question overhanging the economic progress America has made since the Great Recession: Have hiring and opportunity been too concentrated in low-income sectors?

There’s no doubting that the share of job openings recorded in today’s release in low-wage sectors* is higher (32.17 percent, for June) than it was when the recession began at the end of 2007 (31.94 percent). But it’s not that much higher. This percentage, however, is much higher than it was when the current recovery began, in the middle of 2009 (28.38 percent). So over the longer haul, the “low-wage recovery” story remains intact.

Yet does this trend show more recent signs of ending, or at least moderating? That’s what the new numbers leave so unclear. For example that 32.17 percent figure for June (which is preliminary) is much lower than May’s final 33.30 percent. But the May number was revised up from its original 32.53 percent.

The initial June figure is also much lower than that of June, 2015 (33.67 percent) or June, 2014 (32.60 percent). But the comparable May numbers don’t tell a clear story. They fell from May, 2014 to May, 2015 (33.50 percent to 32.34 percent). But then they rose to that 33.30 percent this May.

It’s a good rule of thumb when examining data that the strongest (underlying) trends are revealed by looking at the longest time periods. But it’s also true that “things change,” and that the kinds of fluctuations seen over the last two years could be signs of a top – just as they sometimes (but only sometimes) are in stock prices. For now, it seems that the firmest conclusion we can draw is that more of the real picture will be revealed by the next set of JOLTS figures, which we’ll get next month. Unless of course it isn’t!

*These sectors are retail, leisure and hospitality, and the administrative and support services subsector of the big professional and business services sector.

 

 

(What’s Left of) Our Economy: No JOLTS to the Low-Wage Recovery Story

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Employment, Great Recession, James Fallows, job openings, Jobs, JOLTS, manufacturing, manufacturing renaissance, recovery, The Atlantic, turnover, {What's Left of) Our Economy

One of those running-around days prevented me from commenting yesterday on the new U.S. government figures on labor force turnover. But since they’re a favorite indicator of Federal Reserve Chair Janet Yellen. and since last month’s figures contained a big surprise, the so-called JOLTS report for May is worth a close look.

First, that surprise. The April JOLTS figures (there’s a two-month time lag for this series) showed a startling 23.15 percent sequential jump in the number of job openings in manufacturing. Moreover, the 415,000 figure was the second highest of all time. The increase, which produced the second highest monthly total of all-time (JOLTS statistics only go back to 2000), convinced observer’s like The Atlantic‘s James Fallows that this long-time employment laggard was suddenly “creating too many jobs.”

As I noted last month, the number looked fishy because it contrasted with virtually everything else we’ve learned about manufacturing in recent years – along with many longstanding assumptions.

So it wasn’t entirely surprising to see that the new JOLTS report revised that April manufacturing figure down to 397,000 – still historically high, but no longer so stratospheric. Just as important, the May total (which is still preliminary), was 353,000. That’s healthy, but has been bested several times in the last decade and a half. Let’s hold off, therefore, on heralding the return of the manufacturing renaissance meme – which has never been justified in the first place.

Second, the May JOLTS figures strengthened claims – including by yours truly – that the current American economic recovery has featured entirely too much low-wage job creation. Since I last looked at this subject through the JOLTS lens, past figures have been revised. But they tell the same story, according to my methodology of taking the reported openings in the retail; and leisure and hospitality employment super-categories, and then adding a pro-rated figure I calculate for the low-paying administrative and support services sector of the generally high-paying professional and business services super-category.

When the Great Recession began, at the end of 2007, these low-wage portions of the economy accounted for 31.94 percent of all job openings. By the time the recovery began, their collective share fell to 28.38 percent. The (preliminary) level for May? It’s rebounded past the pre-recession level and climbed to 32.53 percent.

Employment figures like the JOLTS data have been strongly influencing the Federal Reserve’s decisions on whether to raise or lower interest rates – which in turn helps determine how fast and whether the economy will continue growing, at least in the near future. If the central bankers look at the above crucial JOLTS details, keep expecting the country to stay on its (incredibly) easy money course.

(What’s Left of) Our Economy: JOLTS Data Keep the Low-Wage Recovery Story Intact

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Federal Reserve, Financial Crisis, Janet Yellen, Jobs, JOLTS, openings, recovery, subsidized private sector, turnover, wages, {What's Left of) Our Economy

It’s JOLTS day again today – the day the Labor Department releases its new data on turnover in the American labor market. This morning’s results could be more important ever, because these numbers measuring job openings and business hirings and employee voluntary departures (quits) are reportedly among those relied on most heavily by Federal Reserve Chair Janet Yellen in determining the employment scene’s health. And that judgment in turn will surely bear heavily on the Fed’s widely expected decision next month on raising interest rates.

All the smart money, of course, is expecting the rate controlled directly by the Fed to get hiked above the zero level for the first time since the end of 2008 – at the nadir of the financial crisis. But if the JOLTS data really is so crucial, that smart money may not be so confident. For the new JOLTS figures on job openings keep intact the longstanding story of the American jobs market as an increasingly low-wage jobs market.

As with previous posts on the subject, I get to this conclusion by looking at job openings in the economy’s lowest wage sectors as a share of the total. These industries include retail trade, leisure and hospitality, and the low-wage portion of the big but incredibly diverse professional and business services. That latter number isn’t published as such, but I assume (reasonably) that the low-wage share of professional and business services openings is the same as those sectors’ share of that category’s total employment.

The new report – with preliminary September data – shows that the low-wage share of openings hasn’t changed much in recent months. The final figures for July, and August were 33.75 percent and 32.94 percent, respectively, and it rose to 33.80 percent in September.

But these shares are higher than they were at the onset of the last recession (30.46 percent) and at the downturn’s end (29.48 percent). So although the total number of openings in September was just off the historic high (set in July), and therefore reflects some labor market vibrancy, it’s clear that, during the recovery, more and more have been for positions that no parent would want their child to be stuck in.

Another reason for concern flowing from the new JOLTS report is how openings in the government-subsidized private sector keep burgeoning, too. September’s preliminary figure was 18.96 percent – the highest share in recent months. That’s a good deal higher than at the December, 2007 beginning of the recession (17.74 percent). And even though it’s much lower than the 21.98 percent level hit when the recovery technically began in June, 2009, bear in mind that, at that point, these government-subsidized portions of the economy (especially healthcare services) were still virtually the only hiring games in town.

It’s entirely possible that Yellen and her colleagues at the Fed won’t especially care either that so many of the economy’s job opportunities continue to be lousy job opportunities, or that they keep coming in sectors heavily dependent on government spending decisions for their vigor. But if that’s the case, it would indicate that the JOLTS data, and especially the critical internals, aren’t so important to the Fed chair after all.

(What’s Left of) Our Economy: A Key Employment Report was a Bit Better Than it Looked

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Employment, Federal Reserve, hiring, Janet Yellen, Jobs, JOLTS, leisure and hospitality, professional and business services, real private sector, retail, subsidized private sector, turnover, wages, {What's Left of) Our Economy

I’m steadily getting less convinced that the Labor Department’s monthly JOLTS report is such a great measure of the job market’s health any more. After all, one of the main trends tracked in this data series on turnover on the employment scene is job openings – which have been very strong lately. At the same time, it’s getting clearer and clearer that many businesses are getting ridiculously picky in their actual hiring, so the gap between the positions they say are available and jobs they are actually likely to create keeps getting wider and wider.  (Businesses, for their part, insist that the labor market isn’t supplying the workers they want.)  

Nonetheless, it’s one of the favorite labor market indicators of Fed Chair Janet Yellen, (a leading labor economist) and therefore is crucial to the central bank’s decisions to raise (or, at some point, re-lower) interest rates. So since the tightness or easiness of credit clearly bears on employment levels, and the entire economy’s performance, ignore the JOLTS findings at your peril!

August’s results came out on Friday – when yours truly was tied up with personal matters – but it’s worth noting that they broke a pretty reliable recent pattern: The headline figure on job openings was a good deal worse than one crucial internal figure. As always, the internals speak volumes on job quality.

Overall nonfarm openings fell by 5.27 percent month-to-month from July levels. The latter total admittedly was the latest in a series of new monthly records set recently, but the drop-off was the biggest proportionately since July, 2012. The story was similar, though not quite as ominous, in the private sector. The August openings decrease of 5.08 percent – also from a new record July level – was only the steepest since last September. These August findings could improve, as they are still preliminary. But September’s (also still preliminary) monthly jobs report was so dreary that upcoming JOLTS reports could feature even weaker openings numbers.

The good news concerned the share of openings announced in the economy’s lowest wage sectors. This figure can be estimated by taking two hard numbers (openings in the retail and leisure and hospitality sector) and adding to them a softer number (openings in the lower-wage segments of the overall high-wage professional and business services category). These less lucrative positions accounted for 42.91 percent of total August employment in that larger services grouping, so I (not unreasonably) assume that they generated the same share of openings.

At the onset of the last recession, in December, 2007, total low-wage job openings came to 30.46 percent of all openings. By the time the recovery technically began, in June, 2009, this number shrank to 29.48 percent. This August, it was up to 33.09 percent, reinforcing claims that the strong jobs recovery during the current economic expansion has featured too much low-quality job creation. But the latest August numbers – again, which are still preliminary – were a bit lower than the previous August’s 33.52 percent. Two cheers! 

Somewhat more discouraging was the continued prominence of openings in the subsidized private sector of the economy versus the “real” private sector. The former include industries like healthcare services, whose vigor (including job opportunities) depend heavily on government subsidies. As a result, because that portion of the private sector whose fortunes rise and fall due mainly to market forces generates most of America’s productivity growth and innovation, an excessively strong subsidized private sector can throw off assessments of the economy’s real strength and prospects.

When the last recession began, more than seven years ago, the subsidized private sector generated 17.74 percent of all reported job openings. That number jumped to 21.98 percent by the June, 2009 technical start of the recovery, because healthcare was virtually the only remaining employment game in town for America. As the real private sector recovered, subsidized private sector job openings retreated – back to 17.91 percent of the total by August, 2014. (This figure was still higher than when the recession began.) This August’s (still preliminary) estimate has it rebounding to 18,49 percent. And given those poor September overall job-creation totals, the subsidized portion of the private sector could look even more dominant when that month’s JOLTS report comes out.

Again, the JOLTS reports don’t tell us everything we need to know about the American employment scene. But since the Fed takes them so seriously, you should, too. How, though, will the central bankers interpret these new results? Outside Fed HQ, only a mind-reader could possibly know.