Janet Yellen, our soon-to-be chair of the Federal Reserve, loves the JOLTS report.
So market watchers would be wise to follow today’s report — which offers data on job openings, layoffs, quits and hires — since Yellen has cited JOLTS in the past as an important indicator.
Historically, JOLTS hasn’t been as market moving as the BLS’ monthly jobs report. Still, it’s the kind of indicator that could potentially spur the Yellen Fed to alter monetary policy, especially in the years to come as unemployment nears Fed targets.
Here’s where we are ahead of this morning’s report.
Job openings are slowly but surely trending upward.
Hiring is still below pre-recession levels, “Mainly because the separation rate is lower as well,” High Frequency Economics’ Jim O’Sullivan wrote clients. “Net employment growth has been sufficient to keep unemployment trending down.”
Layoffs are down generally. People look to this figure as way to see if we’re observing “labour hoarding” — firms essentially hanging on to the employees that made it through the crisis. While this sounds good, it’s actually somewhat of a problem. When firms cut costs, as they did amid the recession, they eventually reach a boundary and make due with the labour that they have. But firms compensate for the shortfall by maximizing the productivity of the workers that remain. If layoffs are down, but hires have yet to break through, it might be symptomatic of the “labour hoarding” effect.
The quit rate is still pretty low. “To some extent, the drop in the quit rate may be due to the ageing of the population, with younger people more likely to job hop,” O’Sullivan wrote clients. “However, much of it likely reflects still-high risk aversion after a severe financial crisis and recession.” A higher quit rate is a good sign for the overall economy, since people quit their jobs when they are more confident in the job market.
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