MacroScope

U.S. job openings rise, but nobody’s hiring?

August 6, 2013

It’s a good news, bad news story: The U.S. Bureau of Labor Statistics’ Job Openings and Labor Turnover (JOLTS) survey in June showed an increase in job openings, but a decline in new hires. The ratio of unemployed Americans to each open job fell in June to its lowest level in over four years.

The number of job separations (government code for layoffs) also fell, mainly due to fewer layoffs. The June numbers suggest some retracing of the gains of the previous month or two, but does not erase them, says Stone & McCarthy Research Associates economic analyst Terry Sheehan.

Job openings rose by 29,000 in June, but the number of new hires fell by 289,000. Simultaneously, the number of job separations also fell 300,000, mainly on declines in layoffs which fell 215,000.

Net turnover – total new hires minus separations – was up 120,000 in June, and has been fairly steady in the past seven months, Sheehan said.

In general, the number of separations has been low, helping to compensate for the lackluster and uneven pace of new hiring.

Underlying conditions for the labor market are about on trend for incremental improvement.

The U.S. economy generated an underwhelming 162,000 jobs last month, while the unemployment rate fell to a four-year low of 7.4 percent from 7.6 percent.

Peter Newland at Barclays, however, was less optimistic about the JOLTS figures:

The hiring side of the labor market continues to lag. Hiring fell by 289,000 in June, the sharpest in three years and more than offsetting modest gains in the prior two months. As a result, the hiring rate (hiring as a percentage of total employment) was down by two-tenths to 3.1% and has barely recovered since the early stages of the recovery.

This despite a solid recovery in the number of job openings, which rose by 29k in June. The vacancy rate stands at 2.8%, well up from the low of 1.6% during the recession. We believe that this divergence between openings and hiring is consistent with our view that some of the loss of employment during the recession was structural, rather than purely cyclical, in nature.

The number of new hires in June dropped 289,000 to 4.201 million, more than retracing the increases in April and May (+168,000 and +95,000, respectively), Stone & McCarthy’s Sheehan said.

However, to a large extent the decline was due to education and healthcare (-87,000) which felt the impact of the end of the school year and some changes in healthcare laws. Wet weather probably contributed to the decline in construction (-17,000), accommodation (-19,000) and leisure and hospitality (-13,000). Retail job hiring was slower (-36,000), as was trade and transportation (-47,000).

The rate of separations fell 300,000 to 4.081 million in June.

Of these, 73,000 were in job quits. A decrease in voluntary job leavers is a sign of a softening in the labor market as workers feel less confident to change employment.

However, a decline in job quits in the leisure and hospitality (-21,000) and accommodation (-29,000) categories would suggest that some seasonal workers were holding onto their current jobs due to fewer options for moving on to another position, and/or were already employed in June, Sheehan said.

BEVERIDGE, ANYONE?

One reason economists look at the JOLTS data is to place it against the national unemployment rate in order to construct the so-called Beveridge Curve. It shows the relationship between the job opening rate and the national unemployment rate, Sheehan explains. Typically the higher the job openings rate, the lower the unemployment rate.

In June, the rate of job openings was 2.8, unchanged from May, and in line with the very gradual improvement in the labor market. The national unemployment rate was at 7.6 percent in June, unchanged from in May.

Economists look to the Beveridge Curve to assess whether so-called “structural unemployment,”  a potential a mismatch between available skills in the workforce and existing job openings, has increased.

Sheehan said the current shape of the curve points to a slowing in improvements. But that may change with the July data when the lower 7.4 percent unemployment rate is matched against the job openings ratio, she said.

Economists at Goldman Sachs conclude, rather inconclusively:

The June JOLTS report was mixed, showing a higher-than-expected number of job openings, less hiring, and lower layoffs than the May report.

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