Hires Normalize, Quits Climb & Job Openings Surge

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Hires Normalize, Quits Climb & Job Openings Surge

Job openings as a percentage of the US labor force is higher than any month up until 2018, even exceeding the peak of the last economic cycle. That’s the biggest positive from an overall solid Job Openings and Labor Turnover Survey (JOLTS) out today. Here’s why that matters:

  • Job openings as a percentage of the labor force rose to 4.14% in July (latest available data) after dropping to a post-recession low of 3.19% in April. That’s a quick rebound given that it is not far off from 4.26% this past January pre-COVID.
  • By contrast, this rate declined to a record low of 1.47% in July 2009, and only rose to 2.03% in July 2010 (1 year later) and 2.40% in July 2011 (2 years later).

Bottom line: this pent-up demand for labor should prove to be a positive for overall employment trends over the balance of the year. We’ve seen this elevated level of hiring interest convert into near-term employment already, with nearly half of the COVID job losses back online as shown by last Friday’s nonfarm payrolls report for August.

Here are our other key takeaways from JOLTS, which we always review even though it is one month delayed because it gives more granular detail than the Employment Situation Report:

#1: Hires as a percentage of the labor force:

  • Dropped to 3.62% in July 2020 from 4.36% in June, but matches January’s 3.6% rate pre-COVID.
  • By comparison, hiring as a percentage of the workforce troughed at 2.35% in June 2009. (Note: US equities bottomed in March 2009, and even April 2020 was better than June 2009). 

    This rate only increased to 2.68% in June 2010 (1 year later) and 2.85% in June 2011 (2 years later).

The upshot: hires as a percentage of the US workforce rebounded strongly after plunging at the onset of the pandemic and has now settled back down around normal levels.

#2: Quits as a percentage of the workforce:

  • Increased to 1.84% in July 2020 versus 2.17% in January and the post-recession high of 2.21% in July 2019.
  • By contrast, it bottomed much lower at 1.01% in August 2009, and only rose to 1.20% in August 2010 (1 year later) and 1.33% in August 2011 (2 years later).
  • Our “Take this job and shove it indicator”, or quits to total separations, also continues to climb closer to pre-COVID levels. It’s back to 58.9% as of July compared to 62.6% this past January.

The upshot: our “Take this job and shove it indicator” is improving much quicker and more sharply than the last two cycles. Typically, a rise in the number of people voluntarily leaving their jobs reflects improving economic confidence. However, almost half of the jump in quits from April through July were concentrated in retail trade and leisure and hospitality, so it also likely highlights workers’ concerns about contracting the virus in customer-facing, service sector-oriented jobs as well as child care commitments (as mentioned in last week’s Beige Book).

#3: Layoffs and discharges as a percentage of the labor force:

  • Dropped to 1.08% in July compared to the record high of 7.05% in March and all-time low of 1.00% in September 2016.
  • It peaked at a lower rate of 1.72% in April 2009 during the last economic cycle, but also took longer to decline thereafter. It fell to 1.13% in April 2010 (1 year later) and 1.16% in April 2011 (2 years later).

The upshot: similar to hires, layoffs have also returned to normal levels at a brisk clip.

Overall, the latest JOLTS data shows the US labor market is recovering to pre-pandemic levels faster than even the Employment Situation Report shows. There’s still a long road ahead, especially when it comes to the retail trade and leisure and hospitality industries – which make up 20% of the US workforce – amid shifting reopening plans and workers’ concerns about virus exposure. Even still, employers’ robust interest in adding to their payrolls should continue to translate into further hiring the rest of this year.