The good news in today's JOLTS report [6]was that with Wall Street expecting Job Openings to bounce by about 20K from October's 4,834K (remember JOLTs is one month delayed) to 4,850K, instead the number reported was 4,972K. This was coupled with a drop in a hires from 5.1MM to 4.99MM, and separations (either quits or layoffs) from 4.863MM to 4.623MM, for a net separations number of 367K, in line with the revised 353K NFP number revision for November. On the surface, this suggests that Yellen's favorite indicator suggests the mid-summer rate hike is on its way.
However that was not all: the bad news was the as the Beverdige Curve, conveniently added to the JOLTs release [7]shows, a long time has to pass before the US job markets renormalizes again.
[8]
This is what the BLS had to say about the skewed Beveridge curve:
This graph plots the job openings rate against the unemployment rate. This graphical representation is known as the Beveridge Curve, named after the British economist William Henry Beveridge (1879–1963). The economy’s position on the downward sloping Beveridge Curve reflects the state of the business cycle.
During an expansion, the unemployment rate is low and the job openings rate is high. Conversely, during a contraction, the unemployment rate is high and the job openings rate is low. The position of the curve is determined by the efficiency of the labor market. For example, a greater mismatch between available jobs and the unemployed in terms of skills or location would cause the curve to shift outward (up and toward the right).
From the start of the most recent recession in December 2007 through the end of 2009, each month’s point on the curve moved lower and further to the right as the job openings rate declined and the unemployment rate rose. From 2010 to the present, the point moved up and to the left as the job openings rate increased and the unemployment rate decreased.
The problem is that as the curve suggests, the current job openings rate implies either an unemployment rate of 3.5%, well below the current one, or that the current unemployment rate implies a job opening rate some 100 bps lower then what is being represented.
The bottm line is that there as the BLS also says, there is a great mismatch between available jobs and skills, a process that won't renormalize for a long time. How long?
A simple extrapolation based on the trailing 12 month change in jobs vs the total number of hires shows the following:
[9]
In other words, for the Beveridge curve to renormalize, and for the number of hires to catch up to normalcy, and a normal number of separations, at least another three years will have to pass, a fact that is well-known to Janet Yellen for whom JOLTs is far more important as a labor market indicator than the crunt NFP data.
So was the data good enough to suggest a rate hike as soon as the April FOMC meeting, or did it confirm that another three years have to pass before Yellen is "patient" enough that she will wait another three years before the labor market finally returns to normalcy?
