JOLTS: What Delay In Stimulus Means for US Labor Market

By admin_45 in Blog

There are still 10.7 million fewer jobs in the US as compared to February 2020 according to September’s Employment Situation report, with leisure and hospitality accounting for over a third (36% or 3.84 million) of all positions still missing. That’s a significant portion of the labor force held back by COVID-19 and its mitigation measures, and recouping the job losses in this industry alone would shave 2.4 points off the current 7.9% unemployment rate to 5.5%.

That got us curious about why this single industry has been so disproportionately impacted (aside from obvious pandemic-related issues), and one reason involves the structural shift to a more service centric US economy after the 2008 Financial Crisis. A couple of charts we created using data from the latest Job Openings and Labor Turnover Survey (JOLTS) out today shows this dichotomy:

#1: Hires in Leisure and Hospitality as a percentage of the US labor force:

• The peak of the last cycle was 0.65% in November 2006, and this fell to a cyclical low of 0.40% in July 2009.
• This percentage then climbed to 0.66% by November 2015, surpassing the prior cycle high and hitting a post-2008 recession peak of 0.71% in September and December 2019.
• It then dropped to a post-COVID low of 0.31% in April 2020, worse than the prior cycle trough amid lockdowns. More recently, this percentage hit a post-COVID high of 1.10% as establishments started reopening, but fell again to 0.73% in July 2020 and to 0.59% in August 2020 (latest available data).

Takeaway: the leisure and hospitality industry was an important source of incremental American jobs in the last cycle. These positions replaced jobs in other areas like retail and manufacturing (a good thing), but also left the US economy more exposed to virus-related shutdowns than it would have been otherwise.

#2: Job openings in Leisure and Hospitality as a percentage of the labor force:

• The peak in the last cycle was 0.45% in April 2006, which dropped to a record low of 0.13% in August 2009 (yes even including the period thus far with COVID).
• The all-time high was 0.69% in January 2019, much higher than the prior two cycles.
• This percentage fell to a post-COVID low of 0.20% in April (still higher than the trough in 2009), but rebounded to 0.52% in June 2020 and currently sits at 0.49% as of the latest data from August.

Takeaway: job openings in leisure and hospitality as a percentage of the US workforce grew even more dramatically than hires over the last decade, underscoring this industry’s importance in offering employment to marginal workers who might not have been able to find employment elsewhere.

Bottom line: the leisure and hospitality sector will likely be one of, if not the last, industry to recover due to COVID-19 and its containment requirements and this is concerning given how much more the US workforce has grown to rely on this sector for employment.

Now, as for the labor market as a whole, here are our other key takeaways from the latest JOLTS data out today:

#1: Job openings as a percentage of the labor force dropped to 4.04% in August from 4.19% in July, its first fall since April. That’s below January’s pre-COVID reading of 4.26%, but still exceeds the highs of the last two cycles.

#2: Hires as a percentage of the labor force edged down to 3.68% in August from 3.69% in July; this rate has declined every month since May (when it rebounded to 4.55%). Even with its pullback over the past 3 months, this rate still bests January’s pre-COVID reading of 3.60% and matches the prior cycle high in July 2006.

#3: Quits as a percentage of the labor force fell to 1.74% in August from 1.83% in July. Nevertheless, our “Take this job and shove it indicator” – or quits to total separations – rose to 60.80% versus the record high of 63.48% in March 2019.

We believe the surprisingly almost-complete recovery in our “Take this job and shove it indicator” stems from two reasons:

• An unusually fast rebound in people voluntarily leaving their jobs, much of this from workers’ concerns about contracting the virus in customer-facing, service sector-oriented jobs as well as child care commitments (as mentioned in the Fed’s Beige Book). For example, Americans leaving their positions in the leisure and hospitality industry accounted for almost a fifth (17%) of total quits in August.
• Layoffs and discharges as a percentage of the labor force dropped to a record low of 0.92% in August after spiking to 7.05% in March.

In sum, the latest JOLTS data shows the US labor market slowed in August, but the report’s key metrics have also recovered faster than after the Great Recession due to swift action from Congress with the CARES Act. The biggest concern now: PPP money helped keep Americans marginally attached to the labor force, but news today that there may not be a CARES Act II until after the national election could turn temporary furloughs into permanent job losses. Job competition also remains high, and no new stimulus for potentially months will make finding a new job even more challenging, especially if businesses further suffer from a second wave of the virus.