JOLTS: Labor Market Still Strong

After a disappointing jobs report on Friday, the Job Openings and Labor Turnover Survey (JOLTS) couldn’t have come at a better time to look under the hood of the US labor market. Not only did May’s print of 75,000 jobs added miss expectations, but April’s count was revised lower to 224,000 from 263,000 and March’s to 153,000 from 189,000.

Weak jobs reports like Friday are one reason why we turn to JOLTS to see what’s “really” going on. Even though it’s one-month delayed, it gives more detailed color about the US workforce than the Employment Situation report. So has the US labor market started to roll over? Here are our key takeaways from the latest JOLTS report for April 2019 out today:

  • Hires: Hires increased by 4.3% y/y to 5.94 million. As a percentage of the US labor force, total April hiring marked a post-recession high of 3.65%. That still falls below the last two cycle’s highs of 3.68% in July 2006 and 3.98% in January 2001, but this is a notable improvement with still room left to run. 

    What does concern us: employers continue to post more jobs openings than they are hiring actual workers. While now the norm, hires exceeded job openings every month from the start of the series in December 2000 to May 2014. Now, hires have come in below openings for 52 months straight and the gap has widened to above one million for 14 consecutive months. Employers may want to hire, but even this late into the recovery they are still struggling to find qualified workers – something the Fed’s Beige Books also report.
  • Job openings: Available positions may have fallen by 25,000 in April, but job openings are still up 4.8% y/y to 7.45 million. Job openings as a percentage of the labor force were 4.58%, one of the strongest prints back to the early 2000s and close to the record high of 4.68% in November 2018.

    That said, there have been more job openings than unemployed workers for 14 straight months. Like the prior example, this is a new phenomenon that’s now become the norm. April marked the largest discrepancy as well at 1.63 million, so the mismatch between employers’ requirements and candidates’ skills is growing worse.
  • Quits/Total Separations: Our “Take this job and shove it” indicator slipped to 62.4% from 62.8% in March, but it still nears the record high of 63.0% this past January. This is a major positive as it reflects very strong worker confidence, which should also put upward pressure on wages. 

    Moreover, the number of quits are up 4.3% y/y to 3.48 million and quits as a percentage of the labor force registered 2.14% in April. The latter figure is the fourth highest print since the series started in December 2000 and nears the record high of 2.27% in January 2001.
  • Layoffs and discharges: Although layoffs and discharges increased by 59,000 in April, it’s still down 2.0% y/y to 1.75 million. As a percentage of the labor force, it continues to hover around record lows at 1.08% compared to the series trough of 1.00% in September 2016.

Bottom line, the latest JOLTS report shows that the US labor market remains strong and worker confidence is still quite high. Employers continue to struggle finding qualified workers, but hopefully this will encourage them to loosen some of their requirements, particularly when it comes to education. The longer we get into an economic expansion, the more employers typically pull less educated adults into the workforce which benefits the US economy. Of course, we’ll have to looks towards next month’s report to see how much May’s weak Jobs Report print impacts these numbers, but we certainly wouldn’t sound the alarm just yet.

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