President-elect Joe Biden’s nomination of Janet Yellen to lead the Treasury Department makes assessing less covered labor market datasets – such as the Job Openings and Labor Turnover Survey (JOLTS) out today – even more important going forward. We’ve been reviewing JOLTS since Yellen was the Federal Reserve Chair as it includes one of her preferred measures of worker confidence: the number of Americans voluntarily quitting their jobs, given that people don’t tend to do so unless they have better prospects lined up.
While Yellen could only influence monetary policy after the last crisis, this time around she has the opportunity to shape fiscal policy and give direct input on potential stimulus packages to help the US economy recover as quickly as possible. With Yellen a labor economist at heart, JOLTS could strongly inform the views she imparts as part of the Biden Administration. With that, here’s an update on where the quits rate currently stands:
- Quits as a percentage of the US labor force remained at 1.92 pct in October versus September, up from a post-virus trough of 1.20 pct in April.
As we continue to note, that’s an especially fast rebound compared to the last economic cycle. For example, quits bottomed much lower at 1.01 pct in August 2009, and only rose to 1.20 pct in August 2010 (1 year later) and 1.33 pct in August 2011 (2 years later).
Our “Take this job and shove it” indicator, or quits to total separations, fell to 60.54 pct in October from its record high of 63.46 pct in September. It’s still up from an all-time low of 18.82 pct in April.
Given that the number of quits were up 0.6 pct m/m in October, that monthly drop came from a pickup in layoffs and discharges. As a percent of the workforce, layoffs and discharges rose to 1.04 pct in October from a record low of 0.90 pct in September. That’s still down from an all-time high of 7.05 pct in March, and represents a large drop in a short period of time. For example, layoffs and discharges as a percent of the labor force peaked at a lower rate of 1.72 pct in April 2009, and only fell to 1.13 pct in April 2010 (1 year later) and 1.16 pct in April 2011 (2 years later).
So how can there be a rise in both people quitting their jobs and getting laid off or discharged? Two points here:
#1: While an increase in Americans voluntarily leaving their jobs is typically a sign of economic confidence, the unusually quick recovery in people quitting is more pandemic-related. For example, the Fed’s Beige Book out last week said firms are struggling to attract and retain workers as a “sharp rise” in virus cases spurred “renewed fears of infection”. It also listed “providing for childcare and virtual schooling needs” as a “significant and growing issue for the workforce, especially for women”.
#2: Even with the bulk of layoffs/discharges behind us after the huge rounds of layoffs in March and April, rising virus cases and renewed restrictions are contributing to more cutbacks, especially in service sector jobs.
The upshot: health concerns, child-care commitments and renewed restrictions are once again increasingly challenging the labor market, despite an overall high level of interest in hiring. For example:
#1: Job openings as a percentage of the labor force was:
- 4.14 pct in October, up from the post-recession low of 3.19 pct in April and just under 4.19 pct in July. It was also not far off the 4.26 pct reading in January before the pandemic hit.
- In the last cycle, this rate declined to a record low of 1.47% in July 2009, and only rose to 2.03 pct in July 2010 (1 year later) and 2.40 pct in July 2011 (2 years later).
Takeaway: job openings continue to recover quickly and are higher than the peaks of the last two economic cycles. While we’ve seen this elevated interest in hiring convert into near-term employment, the unique nature of the public health crisis has made it more difficult for employers to fill these roles amid fears of infection and child-care commitments. We would also not be surprised for job openings to fall in the coming months given renewed restrictions and business shutdowns. Which brings us to point number two…
#2: Hires as a percentage of the labor force was:
- 3.61 pct in October, down from 3.68 pct in September but up from the post-recession low of 2.59 pct in April. It’s roughly on par with 3.60 pct in January before the public health crisis.
- By comparison, hiring as a percentage of the workforce troughed at 2.35 pct 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 pct in June 2010 (1 year later) and 2.85 pct in June 2011 (2 years later).
Takeaway: hiring has recovered quickly in the latest crisis but will likely continue to get hit in the coming months as shown in the latest Jobs Report unless virus cases and restrictions ease.
Bottom line: the slowdown in hiring evidenced in the latest JOLTS and Employment Situation reports further demonstrate the need for more fiscal stimulus ASAP to keep workers attached to the labor force until vaccines are widely available. Treasury Secretary-elect Janet Yellen understands this well, as her new Twitter (@JanetYellen) account and tweets show: “Our mission is to restore economic prosperity and financial stability.”