Hiring In The US Remains Far Below Pre-Recession Levels

While the headline job openings print in today's JOLTS report was better than expected at 4,455K, well above the 4,050K, and up from last month's revised 4166K, this particular data point, in the New Normal in which not even the Fed believes the unemployment rate, is largely irrelevant due to the increasingly bifurcated nature of the labor market in which there is a small subset of upwardly mobile and in demand workers, and then there are all those who are desperate to get a job, any job, and who have been out of the labor pool for so long they are no longer hireable for anything but the least skilled jobs.

More importantly, when one looks at the other end of the equation, separations, these were barely changed at 4,496K, virtually the same at 4,491K in March, driven in equal terms by voluntary quits (up 12K to 2,473K), or below levels seen in February, and involuntary terminations (rising 13K to 1,651) which are the highest they have been since January.

But most important was how these so-called job openings translate into new jobs, via the actual hiring process. And it is sadly here that things continue to make little sense.

As the chart below shows, while the US may have, somehow, recouped all of its post-recession job losses as was widely trumpeted everywhere on Friday, it sure didn't achieve this courtesy of a vibrant hiring labor market. In fact, as the chart below show, while the US may have recover its annualized job change number, per the non-farm payrolls survey, of just about 2.4 million, or about 200K per month, the pace of US hiring is still just about half of where it should be based on the pre-recession trends.

What this means is two-fold:

  • i) that initial claims print that everyone focuses on as a snapshot indication of the labor market is meaningless, since people being laid off at a time when hiring is still well off traditional levels is an arbitrary construct. Until the US hiring pace rises to at least 5.5 million, all initial unemployment claims are merely a placeholder that is very much irrelevant in the New Normal economy.
  • ii) since hiring is still well-off where it should be, all hopes for a broad increase in wages will continue to be dashed until at least 2018, when the two lines shown above should finally interested all else equal. The simple reason: there is still far too much slack in the labor force, which also continues to make a mockery of the Beveridge Curve as can be seen on page 4 of the linked pdf. The irony here is that at this pace the job openings pace will soon surpass all recent highs, while the unemployment rate, as meaningless as it is, will remain about 1.5% higher than where it should be. Thank the central-planners.

Most importantly, for all the propaganda and rhetoric about the US economy finally returning to normal when it comes to jobs, it may actually be true... as long as one doesn't hope to actually get hired.

Source: JOLTS


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