After a burst of record high job openings which started in June of last year and declined in the fall, today’s December JOLTS report – the favorite labor market indicator of now former Fed chair Yellen – showed another modest drop in job openings across most categories as the year wound down, with the total number declining from an upward revised 5.978MM to 5.8113MM, below the 5.950MM consensus estimate, the lowest print since May.
After the recent breakout, which started with the near record 414K monthly spike in job openings in June after years of being rangebound between 5.5 and 6 million, the latest job opening prints suggests that increasingly more vacant jobs are getting filled, although it is unclear if that is due to higher wages or looser employer standards. In any case, the fact that job openings is dropping is likely another modest negative for future wage growth.
The number of job openings was little changed for total private and for government. Job openings increased in information (+33,000) and federal government (+13,000), however job openings decreased in a number of industries with the largest decreases occurring in professional and business services (-119,000), retail trade (-85,000), and construction (-52,000). The number of job openings was little changed in all four regions. Now if only employers could find potential employees that can pass their drug tests…
It wasn’t just job openings that declined: total hires declined as well, although more modestly, dropping from a near record 5.493 million in November to 5.488 million in December. This is roughly the same as the May print of 5.472 million.
The other closely watched category, the level of quits – which indicates workers’ confidence they can leverage their existing skills and find a better paying job – reversed last month’s decrease, and in December increased modestly from 3.161MM to 3.259MM, suggesting workers were feeling more confident about demand for their job skills than the previous month. The number of quits was little changed at 3.3 million in December. The quits rate was 2.2 percent. The number of quits was little changed for total private and for government. Quits decreased in federal government (-4,000). The number of quits increased in the Midwest region.
And with a total 5.2 million separations (a 3.6% rate), this means that there were 1.6 million layoffs and discharges in December, virtually unchanged from November.The number of layoffs and discharges was little changed for total private and for government. Layoffs and discharges increased in state and local government education (+15,000). The number of layoffs and discharges was little changed in all four regions.
Putting all the data in context:
- Job openings have increased since a low in July 2009. They returned to the prerecession level in March 2014 and surpassed the prerecession peak in August 2014. There were 5.8 million open jobs on the last business day of December 2017.
- Hires have increased since a low in June 2009 and have surpassed prerecession levels. In December 2017, there were 5.5 million hires.
- Quits have increased since a low in September 2009 and have surpassed prerecession levels. In December 2017, there were 3.3 million quits.
- For most of JOLTS history, the number of hires (measured throughout the month) has exceeded the number of job openings (measured only on the last business day of the month). Since January 2015, however, this relationship has reversed with job openings outnumbering hires in most months.
- At the end of the most recent recession in June 2009, there were 1.2 million more hires throughout the month than there were job openings on the last business day of the month. In December 2017, there were 323,000 fewer hires than job openings.
Finally, and perhaps most notably, the Beveridge Curve (job openings rate vs unemployment rate), appears to be gradually normalizing after a nearly decade-long “drift” from its conventional pattern. From the start of the most recent recession in December 2007 through the end of 2009, the series trended lower and further to the right as the job openings rate declined and the unemployment rate rose. In December 2017, the unemployment rate was 4.1% and the job openings rate was 3.8%.
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