A Year From COVID: JOLTS
Total nonfarm payrolls and jobless claims show a US labor market in nascent recovery, but what do other data points have to say?
Beginning with the JOLTS series, we can see that the number of job openings has exploded higher since the turn of the year, and is at its highest level since the data series began in 2000.
However, and in sharp contrast to the number of openings, hiring remains weak. From the chart above, you can see that while hiring recovered sharply after the first reopening last year, the labor market isn’t repeating the same feat in 2021. This large and growing discrepancy between openings and hires has led to the much publicized “labor shortage”, with many blaming government aid for disincentivizing workers from returning to work.
While this could certainly be a contributing factor, it certainly does not tell the whole story. Other factors to consider are that during the shutdown, laid off workers found jobs in other sectors of the economy; or that a lot of workers are simply choosing not to go back to work unless it is for better working conditions and pay.
This phenomenon is also illustrated in the JOLTS Quits data.
The data shows that the number of Quits has been rising ever since a sharp dip at the onset of the pandemic in 2020. This is to be expected as very few people are willing to voluntarily leave their jobs during times of economic stress, when the future is extremely uncertain.
Naturally, as conditions improve and confidence in the future recovers, people become more willing to leave their jobs in search of something that better suits their needs. And this is exactly what the data set reflects, with the number of Quits rising after the economy first began to reopen in the middle of last year.
Curiously, Quits are now at a higher level than they were before the pandemic, recently making a series high. Considering that the level of nonfarm employment has still not recovered to what it was before Covid, Quits being so high hint at some other reason for this other than a fully recovered economy.
The desire for better conditions and/or wages, perhaps? While this may be speculation, what can be said with more confidence is that many of the workers who willingly left their jobs did so without first securing a new one. We know this because while Quits have been surging, Hires have not.
Per the BLS, most of this churn seems to be occurring in a handful of sectors, namely Retail, Education and Health Services, as well as Accomodation and Food Services. Which is strange, considering these are the sectors most affected by lockdowns, and should be seeing the highest rates of rehiring, not quitting.
However, on an economy wide level, the gradual labor recovery has continued, and is corroborated by the falling number of layoffs after the initial surge in firings during March 2020. The number of layoffs rose again towards the end of 2020 as the US experienced a second wave of Covid infections and lockdowns, but only slightly, when compared to the bloodbath that was March. Layoffs have continued decreasing since then, recently moving below the levels set after the first reopening.
More importantly, the number of Quits and Layoffs started to accelerate at the turn of the year; the same time as when job openings started to really take off. This also corresponds with the period of time when the total number of nonfarm employees accelerated out of its end-of-2020 dip, to continue its recovery into 2021 (although still short of its pre-Covid levels).
Hirings, still a relative laggard compared to the sharp trends in the other JOLTS data points, started to accelerate in February, which is also when initial jobless claims started to drop in a more noticeable fashion.
As such, the improvement in the labor market has been picked up by multiple data sources, within the same approximate time frames, lending some optimism to this nascent jobs recovery.
To be continued…
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