Wednesday, February 7, 2018

December JOLTS report continues good news

 - by New Deal democrat

For the last several years, I kept banging away at the fact that "job openings" are soft data that can simply reflect that companies are trolling for resumes, or looking for the perfect, cheap candidate (good luck with that!). Since I've made my point, let's confine ourselves to the hard data of hiring, firing, quits and layoffs.

Last month I noted that, especially averaged quarterly, the JOLTS report tracks the employment report closely. Since that has picked up in the last few months, I wrote that
it's a fair bet that when the December JOLTS report is released in one month, it too will be weaker, just as was the December jobs report.
Was it?

Historically, hiring leads firing.  While the one big shortcoming of this report is that it has only covered one full business cycle, during that time hires have peaked and troughed before separations: 

Here's what that looks like over the last 24 months:

Last month I wrote:
With hiring up, I expect the level of separations to also increase (note some of these are voluntary) in the next few months as well.
That wasn't the case specifically m/m this month, but I still anticipate that total separations (including voluntary quits, which did go up in December) to follow.

Further, in the previous cycle, after hires stagnated, shortly thereafter involuntary separations began to rise, even as quits continued to rise for a short period of time as well:

[Note: above graphs show quarterly data to smooth out noise]

Here are voluntary quits vs. layoffs and discharges on a monthly basis for the last 24 months:

Last month I wrote:
With hiring increasing again, if the pattern from the last decade holds, I would expect quits to improve somewhat as well. 
That did happen in  this month's report. As in the last business cycle, quits are still rising, and involuntary separations remain off their bottom, although the good news is that they have fallen in the last several months.
Bottom line: this was a good report.   At the same time, it remains consistent with being late in the cycle.  Since hiring leads firing, what I am looking for next is at what point dies hiring stagnate, and will  quits follow?