Following the very disappointing, and downward revised May jobs report, when as a reminder the US added only 138,000 jobs, and 120K in the last three months. today’s JOLTS report showed a very mixed picture in the labor market in the month of April (recall JOLTS is two months delayed) with great news on the job openings front, offset by another month of hiring and quits weakness.
So what did “Janet Yellen’s favorite labor market indicator” show? First, the one indicator everyone hones in on first, the number of job openings surged by 301K to an all time high of 6.044 million, with the biggest number of job openings found in Professional and Business Services (1.134MM), Education and Health Services (1.112MM) and Health case and social assistance (1.013MM). The number of job openings edged up for total private (+220k) and increased for government (+39k). Job openings also increased in a number of industries with the largest increase occurring in accommodation and food services (+118k). Job openings decreased in durable goods manufacturing (-30k).
And while America’s millions of job openings remain unfilled – which according to the latest Fed Beige Book is due to a growing decline in qualified workers – a continuation of the recent troubling trend was seen in the April hiring numbers, which showed that new hires in the month plunged by 253K to 5.051 million, the lowest number of monthly hires going back to April 2016! What is just as concerning is that this series has completely flatlined in the 5-5.3 million range for the past three years.
Putting the above chart in a more troubling light was the Y/Y % rate of change: as shown in the chart below, has been steadily declining since 2014, and after its first negative print in February, has wrapped the flatline in both March and April, when only 0.3% more workers were hired than a year ago.
Which leads to our favorite chart: hiring vs payrolls. With the cumulative 12 month change in jobs declining steadily since 2015, many wonder if and when the pace of hiring – traditionally a leading indicator to overall jobs growth – will start a sharper deterioration. For now, it has kept steady in the abovementioned range, and in April dropped to a level last seen in 2015.
Last but not least was that other key indicator, the “quits” rate, or the “take this job and shove it.” As a reminder, Americans only quit their jobs when they are confident they can find a better paying job elsewhere, and in January we saw the number of quits rising to the highest level in 16 years. Here, after a modest rebound in March, when an additional 102K Americans quit their jobs, following a 150K drop in February, the number once again dropped substantially and in April declined to 3.027 million, down 111K to the lowest since last August.
Overall, a very mixed JOLTS reports, with several trading desks quantifying its as outright “schizophrenic”, and as a reminder, JOLTS tends to be goalseeked retroactively during major inflection points in the payrolls series. And with the BLS reporting that job additions in recent months have declined substantially, it may soon be time for the BLS to take a long, hard look at yet another downward JOLTS revision.
Finally, as expected, the latest Beveridge Curve confirms that the “new normal” divergence between job openings and the unemployment rate continues.