Employment & Productivity

All About Jobs, 1: Five Uneasy Pieces

Alan Greenspan used to say that the fears concerning skill obsolescence & the corporate restructuring that took hold in the 1980s & 1990s had changed worker psychology. In this series we examine 5 pieces of underlying evidence.

First up: Job Openings

In the most recent Job Openings and Labor Turnover Survey (JOLTS) data, for July, job openings and hires were mostly unchanged from June, though manufacturing showed a nice uptick in both, as did accommodations and food services. Separations were little changed.

Monthly changes can be distracting, so here’s a longer look at the openings component. At 4.7% of employment in July, private sector openings are at the high for the series, and July’s high matches April and June’s. The high before these recent numbers was the 4.2% in January 2001, as the late-1990s boom was unwinding, all visible on this graph.

Openings look great, but what do they really mean? Well, for that, please see All About Jobs, 2: Should the unemployment rate actually be lower?

by admin· · 0 comments · Employment & Productivity

All about Jobs, 2: Should the Unemployment Rate Actually Be Lower?

There are now just 0.91 unemployed people per opening, compared to 1.12 in January 2001. Or, as the graph below shows if the relationship between the openings rate and unemployment rate that prevailed before the Great Recession were still in place, the unemployment rate “should” be well under 2%, less than half its current rate.

And that means? On to All about Jobs, 3: Phantom Job Openings, evidence from HWOL

by admin· · 0 comments · Employment & Productivity

All about Jobs, 3: Phantom Job Openings: Evidence from HWOL

We suspect that these are phantom job openings, a kind of tire-kicker index in which employers are hoping to land a really big fish, but not using very good bait.

Looking at the Conference Board’s help wanted online (HWOL) series underscores the possibility that employers may not be that serious about these openings.

Both versions of the HWOL series, new, unduplicated listings and total listings—have been trending downward for three years, while the openings rate has been working its way higher. If employers want to fill these jobs, why aren’t they advertising them? We first asked this question in October 2016 and last asked it in May, and the trends have only di-verged further with each asking.

Anything else? Yes! All about Jobs, 4: Should the quit rate be higher?

by admin· · 0 comments · Employment & Productivity

All about Jobs, 4: Should the Quit Rate Be Higher?

As this graph shows, the private sector quit rate is close to an all-time high for the series. Quits are a sign of worker confidence and can forecast wage pressures ahead. But as high as the quit rate looks, should it maybe be higher?

To answer that question, it’d be nice to have a quit series that goes back before 2001. We don’t have an official one of those, but we can construct one by using the share of voluntary leavers among the unemployed and those unemployed five weeks or less. For the period since 2001, the synthetic quit rate has an r2 of 0.93 relative to the actual rate.

Of course, things may have changed over time, but r2’s like that are rare in the world of economics, so we feel pretty confident that this is a good estimate of the pre-2001 history.

And if we take that long-term synthetic series and compare it to the unemployment rate, we get the results graphed above. Instead of the July unemployment rate of 3.9%, the predicted rate should be considerably higher, 5.3%. In other words, workers are acting as if the jobless rate is almost a point-and-a-half higher than it is. Note that the pattern was similar around previous unemployment troughs in 2000 and 2007.

But before 2000 the reverse was true, as the predicted rate was higher than the actual. We suspect what’s at work is a phenomenon that Alan Greenspan used to talk about in the late 1990s: the fear of corporate restructuring and job skill obsolescence that took hold in the late 1980s/early 1990s has changed worker psychology. It takes a lower unemployment rate to give rise to enough confidence to quit than it did several decades ago.

And finally, All about Jobs, 5: What about job leavers and wages?

by admin· · 0 comments · Employment & Productivity

All about Jobs, 5: What about Job Leavers and Wages?

Worker confidence can be measured by the quit rate, and it can also be measured by share of job leavers among the unemployed. (This doesn’t rely on a synthetic quit rate series, although we don’t really think that’s an issue in any case.)

Following up on a suggestion from David Rosenberg of Gluskin Sheff, we looked at the relationship between the leavers’ share and the annual growth in average hourly earnings six months later. (We used production workers because the all-worker series only begins in 2007. Where they overlap, they are tightly correlated.) As this graph shows:

wage growth is trending higher, but far less than predicted. Instead of August’s 2.8% annual gain in AHE, the leavers’ regression says it “should” be 4.2%. (By next February, it “should” be up to 5.2%.)

The gap is further evidence that while tighter labor markets are leading to wage pressures, structural changes in the labor market have probably reduced the intensity of those pressures. It appears Alan Greenspan had this one right.

by admin· · 0 comments · Employment & Productivity