December JOLTS report shows stabilizing at near stall speed, despite one negative “soft data” outlier

 

 - by New Deal democrat

I’m glad I waited a day to write about yesterday’s JOLTS report for December, because I got to read a lot of other commentary on the report, which convinced me to add some additional commentary about the entire JOLTS series. 

Let’s start with the fact that it was not “stale” inasmuch as the report was only delayed by two days. Still, it was for December, so a look in the rear view mirror. Secondly, too much commentary continues to focus on the “soft” job openings number, which over the course of its history has increased far more than any of the other series, as shown in this graph:

There are simply thousands of phantom job postings that are either permanent or designed to convince people that companies are hiring when they really aren’t. It has been a secular trend at least since the Great Recession. 

A second issue is that the monthly variations with all of the series are very noisy. For example,  for most of 2025, in contrast to much other data in the jobs sector, the JOLTS reports had been very much consistent with a “soft landing” jobs scenario. Then in October, all of the numbers were strongly recessionary. At the time I wrote that I would want confirmation for at least one or two more months before hopping on that bandwagon. And indeed, between revisions and improvements in November, October now very much appears to have been an outlier.

Similarly, yesterday there was a fair amount of commentary about a big decline in the job openings data to a new post-pandemic low. So let’s take my usual look at job openings (blue), hires (red), and quits (gold) all normed to 100 as of just before the pandemic:

 

The “soft” data of openings did decline -386,000 to 6.542 million, as indicated above a new low since the pandemic. On the other hand, actual hires rose 172,000 to 5.293 million, in line with the monthly average over the previous six months. Quits also rose 11,000 to 3.2.04 million, also solidly in their 18 month recent range. In other words, with the exception of openings, what we see is a sideways trend in all of these for the past 18 months, with a slight downward step in the past 6+ months.

On the negative side, layoffs and discharges increased 61,000 to 1.762 million, again right in the middle of its average for the past 6+ months, which range has been slightly higher than earlier in 2025:

In short, the numbers paint a picture of an employment sector that weakened in the second half of 2025, compared with the first half, but with no ongoing declining trend.

Now let me get to some additional commentary about the series as a whole. 

1. Historically, job openings have been much more volatile than hires, but on a YoY basis tend to cross the “0” threshold from expansion to contraction and visa versa contemporaneously with hires:

2. On a YoY basis, the one series for which there is some evidence of a slightly leading characteristic is layoffs and discharges (purple, inverted in the YoY graph below; all series averaged quarterly to cut down on noise):

Here is a close-up of the last year of all four data series YoY, monthly. Again, layoffs and discharges are inverted so that an increase shows as a negative number:

With just a few exceptions (March, September, November), the trend in all of the series has been negative, although quits has been positive for the past several months. This suggests a labor market which has continued to decelerate, but on a very slow basis, fitting a “soft landing” scenario.

3. Although layoffs and discharges may be slightly leading (and as I wrote a month ago, they generally lead the unemployment rate and continuing jobless claims), they are quite noisy as compared with the monthly average of initial jobless claims, which also generate fewer false signals. First, here’s the historical look:

And here is the post-pandemic look:

In other words, initial jobless claims YoY, especially as averaged monthly or on a 4 week average basis, continue to be the better indicator, and they are much more timely.

4. Finally, as I have pointed out before, the quits rate (left scale), which typically leads the YoY% change in average hourly wages for nonsupervisory workers (red, right scale), held steady in December, also in the middle of its range for the past 12+ months:

This suggests that nominal wage growth, is likely to remain stable with little variation in the next few months. at least this month. 

To conclude, December’s monthly report continued to be consistent with a “soft landing” despite the noisy downside lurch of job openings. Again, I would want to see another month or two of confirming lower readings before treating this as much other than noise in a “soft data” indicator. To the extent there is leading data in the JOLTS series which helps us forecast, as indicated just above the improvement in Quits suggests nominal wage growth will continue on trend. And layoffs and discharges suggest further slow deceleration in the employment market, but the much less noisy and current initial jobless claims data disagrees, suggesting stability albeit at a near stall over the next several months

Jobless claims rise, but still mainly lower YoY; post-pandemic residual seasonality still at work?

 

 - by New Deal democrat

The December JOLTS report that was delayed from Tuesday is scheduled to be released later this morning. I may cover it today, or may delay until tomorrow, since there won’t be a jobs report. In the meantime, let’s take our weekly look at jobless claims which, to reiterate, are a good short leading indicator for the economy, and specifically for the unemployment rate.

One issue I have talked about almost every week in the past several years is residual post-pandemic seasonality, whereby even after adjustment claims have risen in the first half of the year, and declined in the second half. Which comes in handy today, because initial claims rose 22,000 to 231,000, except for one week the highest since early November. The four week moving average rose 6,000 to 212,250, the highest since the end of December. And with the typical one week delay, continuing claims rose 25,000 to 1.844 million, which is still one of the three lowest readings since last April:

The above graph shows the last three years to help show the residual seasonality I have often spoken of.

On the YoY basis more important for forecasting purposes, initial claims were up 4.1%, but the four week average remained lower by -2.5% and continuing claims were down -1.6%:

Thus, despite the noisier one week number, the trend remains positive. Additionally, this adds to the evidence that post-pandemic residual seasonality remains at work.

Finally, although we won’t get the January jobs report until next week (unless something changes again), here is a look at initial and continuing claims, averaged monthly (blue and gold, right scale), compared with the unemployment rate (red, left scale) for the past three years:

Initial and continuing jobless claims have generally trended downward since September. That strongly suggests that the 4.5% unemployment rate in the November jobs report was the high water mark, and that the unemployment rate will trend downward over the next several months (although it might remain at 4.4% next week).

ADDENDUM: I was asked over the weekend at Seeking Alpha why initial claims are so low, even with job growth almost completely stalling. One possible explanation was the effect of ICE immigration raids on immigrant communities — but if that were the case, I would expect especial declines in the States targeted by ICE so far; mainly California, Illinois, and Minnesota. But the state by state breakdown does not show any such outliers. The best explanation is that demand (mainly by the top 10% of consumers) has still been growing, so there has been little incentive to lay workers off; but on the other hand, uncertainty due to the chaos in Washington, plus in some sectors an impact from AI on hiring has led to caution.

January ADP private employment and ISM services reports show increasing stagflation in a weakly growing economy

 - by New Deal democrat

[Administrative note: the good news is, graphs are back! The bad news is, it is extremely glitchy and energy consuming, so my fingers are still crossed. Basically it boils down to Apple and Google don’t want to interact with one another, and have to be repeatedly dragged, kicking and screaming, into a converation. AARRGH!!]

With official economic data delayed once again by the brief government shutdown, once again we must rely on private sources to at least sketch the contours of the economy.

This morning we got two important portions of that sketch. First, the ADP private employment report indicated an increase of only 22,000 jobs in January (blue), with only 1,000 of those in the goods-producing sector. Within that sector, manufacturing shed another 8,000 jobs (red), while construction added 9,000 (gold):

In the past year, only 280,000 private sector jobs have been added in total in the entire economy, an average of only 23,000 per month. The construction sector added 43,000, while manufacturing declined every single month and lost a total of -159,000.

But if the first report of the morning confirmed a moribund, if not outright contracting employment sector, the other news, in the ISM services report, showed that the 75% or so of the economy that is that sector continued steady if not strong expansion. The headline number was unchanged at 53.8, while the three month average was 53.4 (recall that any number above 50 means expansion) [Note that in each graph below I also show the equivalent sector reading from the ISM manufacturing report earlier this week in gray]:

 

New orders decelerated -3.4 to 53.1, with a three month average of 54.2:

Employment also decelerated by -1.4 to almost a complete halt at 50.3, while the three month average also came in at 50.3:

Note that the ISM manufacturing and services reports are in almost complete accord with the ADP private payrolls report. Both showed weak, but positive, employment growth in the services sector, while the nearly stagnant goods sector and contraction in manufacturing in the ADP report was similar to the continuing contraction indicated earlier this week in the employment reading from the ISM manufacturing report.

Finally, prices paid increased 1.5 to 66.6:

The (relatively) good news is that this is still well below the readings from earlier last year. The unequivocal bad news is that prices paid in both the manufacturing and services sectors showed marked increases over the course of the last year. In other words, inflationary pressures have been building in the pipeline at the same time as employment growth has stalled.

Finally, here are the three month averages for both the headline and new orders indexes, economically weighted at 75% for services and 25% for manufacturing:

Headline: services 53.4, manufacturing 49.5 -> economically weighted average 52.4

New orders: services 54.2, manufacturing 50.6 -> economically weighted average 53.3

Recall that I use this economic weighting as a short leading forecast for the economy as a whole; and needless to say this indicates that a steady if not strong expansion is likely in the next few months, despite the weakness in the jobs environment.

And speaking of job, when the official January report is released, I will be looking for a continued stall or even decline in goods-producing jobs, but also an increase if a lackluster one in service providing jobs. Note that the report will also include adjustments in last year’s numbers as well.

The State of Freight is Mainly Recessionary

 

 - by New Deal democrat

This morning we were supposed to get an actual, on-time JOLTS report for December. But with Pastor Mike Johnson having done what he does best, i.e., keeping the House of Representatives out of session while critical deadlines pass, the BLS announced yesterday that several reports, including both Friday’s jobs report for January, and the aforementioned JOLTS report, have been delayed. This is simply no way to run a first world government.

So in place of what had been scheduled, let’s take a look at the state of freight. To cut to the chase, it remains at least borderline recessionary.

To begin with, although heavy duty truck sales rebounded somewhat in December, up from their post-pandemic low of 336,000 annualized in November to 392,000, even on a three month average basis they are down -3.4% from their peak in 2023. As the graph linked to below shows, with the exceptions of 1996 and 2016, such a decline has otherwise in the past always meant a recession is near: 

 https://fred.stlouisfed.org/graph/fredgraph.png?g=1RctU&height=490 

What hasn’t happened yet (not shown above) is for a significant decline in light vehicle sales to also decline significantly.

Another important way of looking at the components of transportation is the Truck Tonnages Index (blue in the graph linked to below), Freight Railcar Index (red), and Vehicle Miles report (gold), all of which are amalgamated into the Freight Tansportation Services Index (black), which was just reported yesterday showing a 1.2% increase in November:

 https://fred.stlouisfed.org/graph/fredgraph.png?g=1Rcsm&height=490 

Rail freight carloads have been in a secular declined for several decades, that that slow decline has generally continued since the pandemic, after a spurt in 2021. Meanwhile, truck tonnages have also declined. What has increased, and has steadied the overall Index, is vehicle miles traveled.

I have found that the best way to look at the Freight Transportation Services Index is to compare it with the privately compiled Cass Freight Shipments Index, both of which are shown in the graphs below. Because the latter is not seasonally adjusted, both are shown in YoY% terms. Additionally, in the past the Cass Index has been too volatile to the downside to be useful on its own as a recession predictor. So in both graphs linked to below, 5% is added to the calculation, because a Cass value of a bigger YoY decline than -5%, that continues for several months, and coincides with a negative YoY reading from the Freight Transportation Services Index, has been the best combined indicator.

First, here is the long term historical view before the pandemic:

And here is the recent, post-pandemic view:

 https://fred.stlouisfed.org/graph/fredgraph.png?g=1RcsU&height=490 

The Cass Index has indeed been lower by more than -5% YoY for the past six months. But the Freight Transportation Services Index has not confirmed the downturn, as it has been positive YoY for all but one of those months (note the Cass index has been updated through December while the government index has not).

Until the official index turns down for several months, the combined indicator while anemic is not showing recession.

ISM manufacturing for January breaks out to the expansionary upside, with a sidecar of stagflation

 

 - by New Deal democrat

As Although it ended almost three months ago, there are still many economic series that have not caught up, including construction spending, which would normally have been reported this morning for December. As of now, it is only updated through October, and November and December are not expected to be reported for several more weeks. Which continues to mean that the ISM manufacturing and services reports, as well as the regional Fed manufacturing and services reports, are our most complete contemporary picture of the economy.

Last month I wrote that the “ISM manufacturing report for December confirms what the regional Fed reports were telling us: the forward-looking situation is improving,” and boy-howdy did that ever continue in January! 

In more detail, the headline number rose 4.7 from 47.9 to 52.6 (recall that 50 is the dividing line between expansion and contraction). This is the highest reading since August 2022. The three month average, which I use for forecasting purposes, rose to 49.5, still slightly contractionary, but the highest average since one year ago:

 https://tradingeconomics.com/united-states/business-confidence 

The more forward looking new orders component exploded from 47.4 to 57.1, the highest reading sinc February 2022. The three month average is 50.6, expansionary for the first time since the end of 2024:

 https://tradingeconomics.com/united-states/ism-manufacturing-new-orders 

On the other employment continued to contract, although it too rose from 44.8 to the “less bad” 48.1. The three month average is 45.7, still contractionary, and equivalent to several readings last spring:

 https://tradingeconomics.com/united-states/ism-manufacturing-employment 

This suggests a further decline in goods-producing jobs when we get the January employment report at the end of this week.

The other big concern has been prices, particularly in view of the tariff situation. The diffusion index for these rose slightly from 58.5 to 59.0, lower than the readings approaching 70 last spring, but higher than all but one reading in 2023 and 2024. Their three month average is 58.7:

 https://tradingeconomics.com/united-states/ism-manufacturing-prices 

This suggests that inflationary pressures remain very present.

As I have noted in all of these monthly reports for the past year, for the economy as a whole the weighted index of manufacturing (25%) and non-manufacturing (75%) indexes is more important. In the non-manufacturing report, the averages of the last two months for the headline and new orders numbers have been 55.2 and 55.5, respectively. 

If the services index, which will be reported on Wednesday, is in line with those numbers, it will suggest, as did the regional Fed manufacturing indexes for January, that this important sector is improving, and that the economy remains in an expansion, which may be improving as well. The caveat remains the important stagflationary pressures which have been showing up in almost all the recent data.