Wednesday, July 11, 2018

May JOLTS report: as good as could be asked for

 - by New Deal democrat

The simple take on yesterday's JOLTS report for May is that it was excellent:
  • Hires made a new high
  • Quits made a new high
  • Total separations made a new high
  • Openings were just shy of their expansion high
  • Discharges were just shy of their expansion low
In short, pretty much everything good that could happen during a positive labor market, happened.

So let's update where the report might tell us we are in the cycle.

Let's start with the simple metric of "hiring leads firing." Here's the long term relationship since 2000, quarterly through the end of March:

Here is the monthly update for the past several years through May:

In the 2000s business cycle, both turned down well in advance of the recession. That isn't the case now.

Hires had been within a 2% range since last May, and had not made a new high since last October, making YoY comparisons more challenging as of this month, but both hires and separations jumped considerably (interestingly, just like May last year, which makes me wonder if there is a little unresolved seasonality).

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 graph show quarterly data, ending Q1, to smooth out noise]

Here is a close-up of the same data on a monthly basis for the last 2 years through May:

This in no way resembles a late cycle report from the 2000s cycle. Nevertheless, the large majority of overall economic data suggests we are late in the cycle. Thus, my anticipation remains that we will see weaker, and even negative YoY readings on hiring in particular at some point in the second half of this year. We'll see.