Job Market Rolling Over: Rate Of Hiring Declines At Fastest Pace Since 2013

On Wednesday the BLS reported Janet Yellen's favorite labor market indicator, the JOLTS survey, which as expected (since it tracked the modestly weaker October payrolls) showed that in October, the number of job opening dropped from the upward revised September print 5.631 million to 5.534 million, down some 97,000, if modestly better than the 5.5 million expected.  The number of job openings declined to a series low in July 2009, one month after the official end of the most recent recession. Employment continued to decline after the end of the recession, reaching a low point in February 2010.

The October job opening rate remained flat at 3.7%, with the greatest number of job openings in the education & health services, trade & transportation, and retail trade; job openings in professional services, mining, manufacturing, information, food services and government all fell.

The ratio of unemployed persons per job opening was 1.4 in October 2016; when the most recent recession began (December 2007), the number of unemployed persons per job opening was 1.9. The ratio peaked at 6.6 unemployed persons per job opening in July 2009 and trended downward until the end of 2015.  Since January 2016 the ratio has leveled off and has remained between 1.3 and 1.4.

However confrming that the US labor market is indeed rolling over, despite the near record (if modestly declining) number of job openings, the pace of hiring has failed to keep up, and slid once again in October, declining by 97,000 to 5.099 million. This was the lowest print since May.

But more troubling was the annual rate of change in hiring, which as shown in the chart below, dropped 2.2% compared to the 5.212 million a year ago. This was the biggest contraction in hiring since March 2013.

Another way of visualizing the rollover in hiring: when superimposed over cumulative payrolls added over the past 12 months, it appears that the US job market is indeed rolling ober.

The number of hires has exceeded the number of job openings for most of the JOLTS history. Since February 2015, this relationship has changed as job openings have outnumbered hires in most months, also suggesting that the pace of hiring has slowed down disproportionately.

Quits, which are generally voluntary separations initiated by employees, continue to rise. The quits rate can serve as a measure of workers' willingness or ability to leave jobs. The number of quits has exceeded the number of layoffs and discharges for most of the JOLTS history. During the latest recession, this relationship changed as layoffs and discharges outnumbered quits from November 2008 through March 2010. • In October 2016, there were 3.0 million quits, a drop from the 3.1 million in September, and 1.5 million layoffs and discharges

Job Finally, taking a look at the distorted Beveridge Curve, which plots the job openings rate against the unemployment rate, shows that from the start of the most recent recession in December 2007 through the end of 2009, the series trended lower and further to the right as the job openings rate declined and the unemployment rate rose. From the start of the most recent recession in December 2007 through the end of 2009, the series trended lower and further to the right as the job openings rate declined and the unemployment rate rose. From 2010 to the present, the series has been trending up and to the left as the job openings rate increased and the unemployment rate decreased.

In October 2016, the unemployment rate was 4.9 percent and the job openings rate was 3.7 percent. This job openings rate corresponds to a higher unemployment rate than it did before the most recent recession.