The Labor Department released its Job Openings and Labor Turnover Survey (JOLTS) today for January. This survey does not get the same sort of attention that the employment report gets, mostly because it comes out well after the employment data does (we just had the February data released on Friday, and this is for January).
So why am I blogging about old news? Because the numbers in the employment report are the net between newly created jobs and jobs that have been lost. In any economy, be it booming like in the late 1990’s or falling off a cliff like it was a year ago, there will always be some jobs that are created and some that are going away. The JOLTS data gives us a picture of what is happening on each side of the equation, not just the final answer.
Unfortunately this is a relatively new data series and only goes back to 2001. Having the 40 or 50 year history — which is what I usually put up in graphs — would be very interesting, because it would allow us to look at how the Great Recession has differed from those that went before it.
The graph below (from http://www.calculatedriskblog.com/) shows the more detailed picture. People can stop working somewhere for two basic reasons, they quit (including retirement) or they are laid off. In the graph, the red bar on the bottom is the number of people laid off each month. The blue bar stacked on top of it shows the number of people who left a job on their own each month. The purple line shows the number of new jobs created.
If the purple line is below the total of the red and blue lines (below the blue bars on the chart) it corresponds to a loss of jobs in the employment report. The amount of blue above the purple is very large during the fourth quarter of 2008 and the first quarter of 2009, when we were losing about 700,000 jobs, net, per month. Since then, the two lines have converged.
However, it is clear the reason for the convergence is not a sudden surge in the number of new jobs. The number of new jobs being created (gross) has been in decline since the end of 2006, falling from about 5.5 million then to below 4.0 million last summer. The bulk of the decline, though, happened during 2008, and new jobs have been bumping along in a tight range around the 4.0 million level for most of the last year.
Note that there was a surge in layoffs towards the end of 2008, but that the lay-off rate has since declined and is now roughly in line with where it has been for most of the decade. What has really changed over the last year is that the number of people willing to tell their boss to “take this job and shove it” has declined sharply. Given how long people have been out of work after they lose their jobs in this recession, this seems like a perfectly rational thing to happen.
Another factor that might be at play is the enormous amount of wealth that has been lost from the collapse of the housing bubble (and to a lesser extent from the stock market, but the rally over the last year has restored much, but not all, of that wealth). That loss of wealth has thrown a monkey wrench into the plans of many who might have planned on retiring, but now realize that if they did so, they would be very poor, and therefore keep on working.
Another factor could be that with almost one in four houses with mortgages underwater, people are not able to move to take a new job.
The final line on the graph, the yellow line, is the number of job openings. It started to fall about six months later than the number of new hires, but the decline was much more precipitous. The good news is it looks like it has turned the corner. This might mean that the pace of hiring could start to pick up, driving the purple line back up above the blue bars.
In other words, we could soon actually see net job growth in the country, but only provided that the rate of people deciding to quit their jobs does not return to its historic levels. I suspect the quit rate will not rebound for at least a year after we turn the corner in terms of actually seeing the hire rate rise. This recession has left a much deeper psychic scar than the last two downturns did, which should make people reluctant to leave the safety of their current job, even if they are miserable in it or their boss is a jerk.
The quit rate will not stay down forever, though, but during the lag we might be able to start to make a bit of a dent in the number of people who are out of work. It will be a very long time, however, before we have more total jobs in the economy than we did when the recession started in December of 2007.
Finally turning the corner on employment would do wonders on lots of fronts. It would mean more money in the pockets of more people, which would be great for retailers ranging from Big Lots (BIG) to Nordstrom (JWN). It would also mean that people would have the ability to pay their credit card bills and mortgages, which would help the banks like Bank of America (BAC) and Capital One (COF).
Dirk van Dijk, CFA is the Chief Equity Strategist for Zacks.com. With more than 25 years investment experience he has become a popular commentator appearing in the Wall Street Journal and on CNBC. Dirk is also the Editor in charge of the market beating Zacks Strategic Investor service.
