May JOLTS Report: Good, But More Stimulus Needed

By admin_45 in Blog

You probably saw this JOLTS report stat a lot yesterday: even with a rebound in hiring, there were still 3.9 unemployed workers for every job opening in May. Here are the numbers:

• The ratio of unemployed people for every open job—including those who are employed part-time because they cannot find full-time work and those who are marginally attached to the labor force—fell to 6.3 in May from 7.2 in April (latest available data). Prior to the pandemic, that figure was 1.7 in February. During the depths of the Great Recession there were 11.4 unemployed workers for every job opening in July 2009.
• Using the headline unemployment figure, which does not include discouraged workers, there were 3.9 unemployed individuals for every available position in May compared to 4.6 in the previous month and 0.83 in January. The record high was 6.5 in July 2009.

Fortunately, the situation is likely better than this data indicates. During and after the Financial Crisis, those who lost their jobs knew they were probably not going to get them back, so the more unemployed workers per job opening meant fiercer competition. The current environment is different because many workers who lost their jobs have at least some chance of getting rehired again. Employers do not need to post a job opening if they have furloughed workers ready to come back to work. Bottom line: there are fewer unemployed workers per job than even during the Financial Crisis, but these periods are not exactly comparable, so the ratio is likely skewed to the upside.

The latest Job Openings and Labor Turnover Survey (JOLTS) out yesterday showed employers hired – whether that be new or preexisting workers – at record levels in May. We always review this data even though it is one-month delayed because it captures more granular detail about the state of the US workforce than the Employment Situation Report.

Here are the key data takeaways for May (latest available data):

(Please note that while most commentators look at the levels of each data point in the report, we always adjust it for the size of the US labor force so we can compare current data to prior cycles.)

#1: Hires as a percentage of the labor force:

• Rose to 4.10% in May, besting the post-recession high of 3.69% in April 2019.
• Troughed at 2.35% in June 2009. (Note: US equities bottomed in March 2009, and even April 2020 was better than June 2009)
• Increased to 2.68% in June 2010 (1 year later) and 2.85% in June 2011 (2 years later).

Takeaway: employers hired new or welcomed back furloughed workers at strong levels as the economy started to reopen in May. While it took a long time for employers to start hiring again in the last economic cycle, employers are adding workers to their payrolls much quicker this time around due to the unique setup of this recession with lockdowns.

#2: Job Openings as a percentage of the labor force:

• Increased to 3.41% in May 2020 compared to the record high of 4.62% in November 2018.
• Fell to a record low of 1.47% in July 2009.
• Rose to 2.03% in July 2010 (1 year later) and 2.40% in July 2011 (2 years later).

Takeaway: the increase in job openings despite an uncertain economic environment highlights an underlying strength of the labor market. Employers’ willingness to look for new hires shows confidence that the economy will continue to improve. As the chart above clearly shows, hiring is thus far more robust than 2009 – 2010.

#3: Quits as a percentage of the workforce:

• Edged up to 1.31% in May versus the post-recession high of 2.21% in July 2019.
• Bottomed at 1.01% in August 2009.
• Increased to 1.20% in August 2010 (1 year later) and 1.33% in August 2011 (2 years later).

Takeaway: quits as a percentage of the workforce has not dropped as low as during the Great Recession, but we still expect it to remain depressed as people hold on to their existing jobs given a still-uncertain economic/pandemic outlook. We will look for the latest uptick to continue as a sign that workers are regaining confidence in the economy.

#4: Layoffs and discharges as a percentage of the labor force:

• Dropped to 1.14% in May compared to the record high of 7.05% in March and all-time low of 1.00% in September 2016.
• Peaked at 1.72% in April 2009.
• Fell to 1.13% in April 2010 (1 year later) and 1.16% in April 2011 (2 years later).

Takeaway: the bulk of layoffs are in the past and now actually around normal levels, fortunately declining much faster than the Great Recession. The latter point is a function of the service industry being able to hire workers back, but this is another data point worth watching given the shifting nature of lockdowns amid a resurgence of COVID cases.

#5: Our “Take This Job and Shove It” indicator, or quits to total separations:

• Jumped to 49.9% in May after hitting a record low of 18.8% in April. The all-time high was 63.5% in March 2019.
• Bottomed at 36.5% in April 2009.
• Rose to 48.1% in April 2010 (1 year later) and 47.2% in April 2011 (2 years later).

Takeaway: our “Take this job and shove it” indicator improved mostly due to the decline in layoffs. Again, the quits part of the equation will be an important tell about the strength of the US economic recovery.

The upshot: May’s JOLTS report showed employers were eager to hire or rehire instead of letting workers go permanently. There’s still a long road ahead, but this data should encourage the Federal government to continue helping by passing more stimulus to make a fuller US labor market recovery more likely.