Friday, March 11, 2016

Goldman: "Quits and Gross Hiring Are Mostly Back to Normal"

by Bill McBride on 3/11/2016 08:57:00 AM

A few excerpts from a research piece by Goldman Sachs economist Daan Struyven: Quits and Gross Hiring Are Mostly Back to Normal

Two years ago, Fed Chair Janet Yellen introduced a “dashboard” of labor market indicators that included two measures of worker flows, the hiring rate and the quit rate. At the time, these two measures reinforced the case that there was more labor market slack than the headline unemployment rate suggested.

Today, the hiring and quit rates have recovered substantially to levels nearly in line with historical averages and consistent with the current U6 underemployment rate. This recovery of gross job flows has arguably had two positive effects. First, industry-level data suggest that higher turnover may have contributed to faster wage growth. Second, the increase in the hiring rate may have made it easier for unemployed workers to re-enter employment.

But the recovery in dynamism still looks somewhat incomplete. In particular, re-employment rates for the long-term unemployed have yet to fully normalize. We see this as an indication that despite considerable progress, the labor market has not yet fully healed.
Struyven is referring to the JOLTS. Here is a graph from the recent report:

Job Openings and Labor Turnover Survey Click on graph for larger image.

This graph shows levels for job openings (yellow line), hires (dark blue), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

Note that hires (dark blue) and total separations (red and light blue columns stacked) are pretty close each month. This is a measure of labor market turnover.  When the blue line is above the two stacked columns, the economy is adding net jobs - when it is below the columns, the economy is losing jobs.

Jobs openings increased in December to 5.607 million from 5.346 million in November.

The number of job openings (yellow) are up 15% year-over-year compared to December 2014.

Quits are up 13% year-over-year. These are voluntary separations. (see light blue columns at bottom of graph for trend for "quits").

As Struyven notes, the hiring and quit rates have recovered to "historical averages".