“There’s one report that everyone in Washington, the geek world, sort of hangs on. It’s called the JOLTS Report, it’s jobs open, jobs lost.” Former White House chief economic advisor Gary Cohn said this on a recent Freakonomics podcast. Regular readers of DataTrek know JOLTS stands for Job Openings and Labor Turnover Survey, and we review the data every month right after it is released.
We originally started reviewing JOLTS several years ago as it included one of Former Fed Chair Janet Yellen’s reportedly preferred measures of the US labor market: the quits rate as a gauge of worker confidence. That it’s also important to current White House staff means its significance remains. Given that the latest data came out on Friday, we spent the weekend poring through it.
Here are our biggest takeaways:
#1 – Gary Cohn mentioned the JOLTS report to highlight how the number of job openings continues to exceed unemployed workers by a wide margin.
- The issue: there are 7.58 million job openings versus 6.54 million unemployed workers as of this past January, a difference of over 1 million people.
- Prior to March 2018, unemployed workers always exceeded job openings every month dating back to when the JOLTS series started in December 2000.
- Yet available positions have now surpassed those looking for work for 11 consecutive months. As Cohn said: “If all those people were capable of working, which they’re not, we still have a million more jobs than people to fill them.”
Clearly there’s a mismatch between workers’ skills and employers’ job requirements, but it’s not where you might think (a shortage of coders in the Tech sector). But if you look at the types of work that have experienced the largest increases in job openings since the prior cycle peak, they are more prosaic than programmers and other Tech jobs. We’ll compare the latest data to January 2007 as a frame of reference. Here are the job opening numbers:
- Information: 173k in January 2007 vs. 165k now. Difference: down 8k
- Education and health services: 757k in January 2007 vs. 1.39 million now. Difference: +636k (most of this is health services. Educational services jobs are only up 58k over this timeframe.)
- Leisure and hospitality: 512k in January 2007 vs. 1.11 million now. Difference: +593k
- Trade, transportation and utilities: 891k in January 2007 vs. 1.47 million now. Difference: +580k
- Health care and social assistance: 694k in January 2007 vs. 1.27 million now. Difference: +579k
- Accommodation and food services: 429k in January 2007 vs. 991k now. Difference: +562k
- Total: 2.95 million
Bottom line, even just two of the non-Tech industry examples entirely explain the disparity between the number of job openings and unemployed workers of 1.05 million in January. Available jobs in the information sector have actually declined slightly, which is where tech workers like computer programmers would reside. Cohn’s solution: “We need a million immigrants today just to balance the equation. So this is pretty simple to me.” Our statistically-based addendum to that thought: “And/or… pull more non-college educated Americans into the workforce to fill these jobs, since participation rates for this cohort lag those with a BA/BS degree.”
#2 – Most economic pundits call out levels when reviewing JOLTS data, but you have to adjust for the size of the labor force since the data dates back to the end of 2000. Here are those numbers for the most recent report and a few historical reference points:
- Job openings as a percentage of the labor force was the third highest in the series at 4.64% in January 2019, just under the high of 4.68% in November 2018. Therefore, a record level of hiring interest continued into the beginning of 2019. Openings rose by 102k to 7.58 million.
- Although hires also increased by 84k to 5.80 million two months ago, hires as a percentage of the labor force has plateaued at a little over 3.5% for several months. The latest figure was 3.55% compared to the record high of 3.98% in January 2001.
- Consequently, the number of job openings has been greater than the number of hires for 49 straight months. Prior to June 2014, hires had always exceeded job openings in every month since the end of 2000. The latest gap: 1.78 million more job openings than hires.
#3 – As for Janet Yellen’s reportedly favorite labor market indicator, quits as a percentage of the workforce was at its fourth highest level at 2.14% in January since December 2000. That’s close to its all-time high of 2.27% in January 2001, which shows workers are very confident in the economy and their ability to pursue other advantageous opportunities.
Moreover, our “Take this job and shove it” – or quits to total separations – ratio reached a record high of 62.9% this past January. As we’ve mentioned before, this data helps explain why wage growth continues to strengthen, as workers most typically quit their job after they secure a better-paying position.
In sum, this was a strong JOLTS report to start the year: record levels of hiring interest and peak confidence among workers, which correlates to better wage bargaining power. Actual hiring has room for improvement, but that will come down to hiring lesser skilled workers (i.e. less than a college degree) in industries – think jobs like caretakers, waiters, retail sales, etc. – that have produced the largest need for employees for over a decade. That or Cohn’s suggestion, more immigrants to help fill these open positions to boost US economic growth and consumer spending. Or both, our favorite answer…
Podcast with Cohn: http://freakonomics.com/podcast/cohn/