Friday, October 16, 2015

The JOLTS report for August continues to underwhelm

 - by New Deal democrat

I continue to be underwhelmed by the monthly JOLTS reports.  Most commentators focus only on the job openings number without paying attention to the pattern of this series during the 2002-07 expansion.

Here is the overall series since its inception:

As an initial matter, while this series looks extremely useful, because there is only 15 years of history, there is only one complete business cycle with which to compare.  During that cycle, hiring peaked well before job openings. As shown above, the peak in hiring (and the trough in voluntary quits, not shown) was the first signal that the expansion was decelerating.

Now let's zoom in on the last year:

Once again, while job openings have skyrocketed, actual hires have stalled.  It is only because August 2014 featured an anomalous decline in hiring that the Hires series has not turned YoY negative.

This suggests to me that (1) we are past mid-cycle, as many other series also show; and (2) there is a labor market disconnect, as employers are not filling a record number of openings.  As to why those openings are going unfilled, I have seen a fair amount of survey information where employers are complaining of not being able to find appropriately skilled candidates.  I suspect that there are one or both of two clauses missing in those sentences, as in:  "We are not able to find skilled candidates [for the wage we want to pay and/or because we refuse to pay for any on-the-job training]."

Again, this is an underwhelming report, but if the underemployment rate continues to decline, I anticipate that more and more employers will capitulate on increasing wages for new hires.

Sent from my iPad