JOLTS Recap (March)
Falling hiring doesn't dent net employment growth
TL;DR: The “Great Stay” intensified in March, with hiring, quits and layoffs all declining. Relative to a year ago, job growth has increased a little but turnover is down substantially.
In the rest of this recap, I’ll cover:
The Great Stay Continued
Job Growth vs. Turnover
Uggh, Openings
More below chart:
1. The Great Stay Continued
The 3 main “flow” metrics within the JOLTS report - hires, quits, and layoffs - all declined in March. All 3 remain lower than you would expect given the current unemployment rate of 3.8%.
The hires rate fell to 3.5%, matching its cyclical low. Last cycle, this level of hiring would have been consistent with an unemployment rate of 6.5%! It’s a good time to have a job, but a not-so-good time to be actively looking for one.
The quit rate fell to 2.1%, a new cyclical low. Last cycle, this level of quits would have been consistent with an unemployment rate of 4.7%. With relatively few outside opportunities, workers are more reluctant to quit.
And finally, after a small bounce in February, the layoff rate ticked back down to 1.0%. This is very, very low by historical standards - never seen in the pre-COVID era (data begins in 2000). Firms have cut back on hiring AND layoffs.
2. Job Growth vs. Turnover
The disconnect between the JOLTS flows data and unemployment has been a feature of the entire post-pandemic period: first during the “Great Resignation” of 2021-22 (hires and quits much higher than you’d expect given the unemployment rate), and more recently during the “Great Stay” (hires and quits much lower than you’d expect given the unemployment rate).
But over the past year we’ve seen a 2nd disconnect emerge: between the JOLTS flow data and net employment growth. Typically these move in tandem - the labor market worsens, causing both turnover and net employment growth to decline.
But instead, we’ve seen net employment growth increase a little over the past year, even as hires and quits have fallen. What gives? It’s probably stronger labor supply growth.
A year ago, employers were hiring more previously-employed people - entailing more quits, and consequently further boosting hiring via role backfills. But with the expansion of labor supply, a hire has no associated quit, nor an associated backfill hire. You can increase employment with lower turnover.
3. Uggh, Job Openings
If you read this newsletter, you’re probably used to me saying that job openings (which are still elevated) are a poor signal of how tight the labor market is. Hires and quits are a more accurate depiction of what’s going on.
But I have something new to say this month! Folks are used to describing openings as “labor demand”. But that’s not quite right. Job openings measure “excess demand for labor”. Excess demand can fall because demand declines. But it can also fall because of an increase in supply. When it gets easier to fill roles, you need fewer job openings. And that is probably at least a partial explanation for the recent decline in job openings.
