JOLTS: When Fiscal Stimulus Helps
Fiscal stimulus isn’t always ineffective. Once we understand what it can and can’t do, we can gain a better appreciation for how it is helping. In the case of Covid and lockdowns, fiscal stimulus was done to help people who were suddenly jobless pay for essentials, and also to provide businesses with enough liquidity to keep employees on payroll.
The JOLTS hires and layoffs data show that layoffs spiked massively at the start of the pandemic, which is to be expected given the same kind of spike in initial jobless claims. Here’s a chart with the spike taken out:
Without the spike, the number of layoffs post Covid look indistinguishable from what was happening pre-Covid. That’s fiscal stimulus at work, and solely from the standpoint of keeping people in jobs that they probably would have otherwise lost, it’s doing very well.
What is interesting about the chart though, is that Job Openings have been declining from 2018. That’s way before Covid, and hints at the economic cycle turning even before Covid swept across the globe. All the pandemic did was make it much worse, much quicker.
Also, in line with how jobless claims remain elevated almost a year after the first lockdowns, job openings have not recovered to pre-Covid levels. After an initial upward surge in May/June from reopenings, job openings have lost their upward trajectory and have begun to plateau.
There we have, on one chart, both the utility and limitation of fiscal stimulus – enough to keep layoffs stable (post the initial spike), but not enough to get firms hiring at pre-pandemic levels. And unfortunately for policymakers, bigger is not always better.
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