Reclaiming Common Sense

There are a number of data sets that are released every month: The Jobs Data, New Home Construction Data, New Home Sales Data, Existing Home Sales data, Consumer Price Index data and Retail sales data, to name a few. Some data is very current, such as the weekly unemployment claims data. Other data lags considerably. One of the lagging data sets is the Job Openings and Labor Turnover Survey (JOLTS.)This month we saw the release of the Jobs data for May. The JOLTS data that was released this month was for April. The JOLTS data has been receiving considerably more attention during the past year than it "ever" has received because of the elevated levels of Job Openings. The problem is that Job Openings (JO) is only part of the JOLTS report.

Not all expansions are created equal.Earlier this month this column wrote a series of articles regarding the April Jobs Report data:

The net effect was that some sectors have expanded since the recession while other sectors have not fully recovered. We have had difficulty. We are seeing unemployment drop and employment increase - the offsetting forces are making participation appear weaker than it really is. We are also seeing some part-time jobs replaced by full-time jobs. This also has negligible impacts on the participation rate because a part-time job worker is a participant and a full-time job worker is a participant.The sector data reveals that Health and Education, Leisure and Hospitality, Professional and Business Services, and the Trade, Transportation and Utility (TTU) Sectors have increased the most since the recession. 

The Sectors that have expanded the most have  the most Job Openings. There are cycles for job openings - this time of year we see Leisure and Hospitality post jobs. Right now the top two sectors are the Education and Hospitality Sector and the Professional and Business Services Sector. What is flying under most radars is that Manufacturing Job Openings are on the rise.  Manufacturing has almost record high openings since the data was first collected.

Labor Turnover (LT) is another component of the JOLTS data. There is also a level of seasonality in Separations - this should not come as a shock. What is interesting here is that separations are lower this year than last year for Education and Health Services, Leisure and Hospitality, and  Professional and Business Services. Separations are higher this April for Education and Health Services than they were during April of  2014, 2015, and 2016.

Why are people in Education and Health Services Quitting? There were over 1 million EHS workers who quit last month. There is a similar trend for Professional and Business Services, Leisure and Hospitality, and the TTU sectors. Are people in this sector quiting because they are frustrated with the health care system?  Are educators dropping out because they can find work elsewhere for more money? Is this a crisis in the making? more research will have to be done.

The Number of Health and Education Hires are not Keeping up with Separations.
The data looks better for Professional and Business Services, Leisure and Hospitality, and TTU.  If we have a record or near record high for EHS quits and near record lows for EHS hiring then we have a gap which pushes jobs openings higher. The hiring in the other three sectors are down from last year for PBS, TTU, and Leisure.  The long-term trend is that hiring in these four sectors are heading higher and approaching the levels of hiring seen prior to the recession.

The job openings report is a lagging economic indicator. It tells us where we have been. It also is an incomplete picture because we do not know if these openings are full-time or part-time jobs. We do not know if they are seasonal jobs. The non-linear movement of the "hires," "fires," and "quits" indicate that they are not permanent jobs. We need to find out why people are quiting the Health and Education Services sector at record levels.

It's the economy.