I’m steadily getting less convinced that the Labor Department’s monthly JOLTS report is such a great measure of the job market’s health any more. After all, one of the main trends tracked in this data series on turnover on the employment scene is job openings – which have been very strong lately. At the same time, it’s getting clearer and clearer that many businesses are getting ridiculously picky in their actual hiring, so the gap between the positions they say are available and jobs they are actually likely to create keeps getting wider and wider. (Businesses, for their part, insist that the labor market isn’t supplying the workers they want.)
Nonetheless, it’s one of the favorite labor market indicators of Fed Chair Janet Yellen, (a leading labor economist) and therefore is crucial to the central bank’s decisions to raise (or, at some point, re-lower) interest rates. So since the tightness or easiness of credit clearly bears on employment levels, and the entire economy’s performance, ignore the JOLTS findings at your peril!
Liquidity moves markets!Follow the money. Find the profits!
August’s results came out on Friday – when yours truly was tied up with personal matters – but it’s worth noting that they broke a pretty reliable recent pattern: The headline figure on job openings was a good deal worse than one crucial internal figure. As always, the internals speak volumes on job quality.
Overall nonfarm openings fell by 5.27 percent month-to-month from July levels. The latter total admittedly was the latest in a series of new monthly records set recently, but the drop-off was the biggest proportionately since July, 2012. The story was similar, though not quite as ominous, in the private sector. The August openings decrease of 5.08 percent – also from a new record July level – was only the steepest since last September. These August findings could improve, as they are still preliminary. But September’s (also still preliminary) monthly jobs report was so dreary that upcoming JOLTS reports could feature even weaker openings numbers.
The good news concerned the share of openings announced in the economy’s lowest wage sectors. This figure can be estimated by taking two hard numbers (openings in the retail and leisure and hospitality sector) and adding to them a softer number (openings in the lower-wage segments of the overall high-wage professional and business services category). These less lucrative positions accounted for 42.91 percent of total August employment in that larger services grouping, so I (not unreasonably) assume that they generated the same share of openings.
At the onset of the last recession, in December, 2007, total low-wage job openings came to 30.46 percent of all openings. By the time the recovery technically began, in June, 2009, this number shrank to 29.48 percent. This August, it was up to 33.09 percent, reinforcing claims that the strong jobs recovery during the current economic expansion has featured too much low-quality job creation. But the latest August numbers – again, which are still preliminary – were a bit lower than the previous August’s 33.52 percent. Two cheers!
Somewhat more discouraging was the continued prominence of openings in the subsidized private sector of the economy versus the “real” private sector. The former include industries like healthcare services, whose vigor (including job opportunities) depend heavily on government subsidies. As a result, because that portion of the private sector whose fortunes rise and fall due mainly to market forces generates most of America’s productivity growth and innovation, an excessively strong subsidized private sector can throw off assessments of the economy’s real strength and prospects.
When the last recession began, more than seven years ago, the subsidized private sector generated 17.74 percent of all reported job openings. That number jumped to 21.98 percent by the June, 2009 technical start of the recovery, because healthcare was virtually the only remaining employment game in town for America. As the real private sector recovered, subsidized private sector job openings retreated – back to 17.91 percent of the total by August, 2014. (This figure was still higher than when the recession began.) This August’s (still preliminary) estimate has it rebounding to 18,49 percent. And given those poor September overall job-creation totals, the subsidized portion of the private sector could look even more dominant when that month’s JOLTS report comes out.
Again, the JOLTS reports don’t tell us everything we need to know about the American employment scene. But since the Fed takes them so seriously, you should, too. How, though, will the central bankers interpret these new results? Outside Fed HQ, only a mind-reader could possibly know.