Tuesday, September 12, 2017

More JOLTS hard data weakness in July

 - by New Deal democrat

I have been a dissenter about the JOLTS reports for over a year (although, perusing the intertoobs yesterday, it looks like a few more observers have joined the chorus). The typical commentator has focused on job openings (blue in the graph below), which have been trending higher strongly (as they did in yesterday's report for July): 

But openings are the one aspect of the report that are not "nard" data. They can just as easily be skewed by employers trolling for resumes, perhaps laying the groundwork for visas for cheap immigrant labor, or simply refusing to offer the wage or salary that would call forth enough actual applicants to hire. 

Hence the disconnect between "openings" and "hires," (red in the graph above), which have been barely above stagnant for the last year.  Here is the YoY trend for hires:

Thus I prefer to focus on the "hard" data series such as hires, quits, and layoff, where the story hasn't been nearly so strong.

Let me start by comparing hires to total separations (averaged quarterly to cut down on noise):

We only have one full business cycle to compare, but since the outset of the series at the start of the Millennium, the trend has been for hires to slightly lead separations. In the quarterly view, hires have been stagnant for going on 2 years.  Here is the monthly view of the last few years:

In the last three months, hires have picked up somewhat - although not to new hiighs, unlike separations, which *are* at new highs.

Let's further compare historical hires with voluntary quits and also layoffs and discharges. Here we see that in the last cycle, hires stagnated, and shortly thereafter involuntary separations began to rise, even as quits continued to rise for a short period of time as well:


Next, here is the current cycle, quarterly through June:

Significantly, even while quits have continued to rise, involuntary separations bottomed a year ago, and have risen on a quarterly basis ever since.  Here's the monthly view of the last several years: 

The recent surge in layofs and discharges is actually similar in scale to that just before the last recession.

In short, just like the slowly decelerating YoY change in payrolls:

JOLTS shows an employment situation that, while still positive, is slowly decaying.