After a burst of record high job openings which started in June and eased modestly in August, today's October JOLTS report - Janet Yellen's favorite labor market indicator - showed a sharp drop in job openings across most categories now that hurricane distortions have cleared out of the system, with the total number dropping from 6.177MM to 5.996MM, well below the 6.135MM estimate, the biggest monthly drop and the lowest job openings number since May, resulting in an October job opening rate of 3.9% vs 4% in Sept.
After nearly two years of being rangebound between 5.5 and 6 million, the latest drop in job openings despite the alleged improvement in the economy is another inidication that an increasingly greater number of jobs may simply remain unfilled in a labor market where skill shortages and labor imbalances are becoming structural.
The number of job openings was down for total private and was little changed for government. Job openings increased in accommodation and food services (+94,000), construction (+48,000), and real estate and rental and leasing (+40,000). Job openings decreased in wholesale trade (-90,000), finance and insurance (-47,000), information (-32,000), and nondurable goods manufacturing (-26,000). The number of job openings was little changed in all four regions. Now if only employers could find potential employees that can pass their drug test...
One notable change in this report was that despite the sharp drop in job openings, the number of hires in October soared by 232K to 5.552MM in October, the highest since March 2001, and further reducing the hiring rate from 3.8% to 3.6%. At the industry level, the number of hires increased in other services (+55,000) and health care and social assistance (+45,000). Hires decreased for state and local government, excluding education (-32,000). The number of hires increased in the Northeast region.
On an annual basis, the pace of hiring spiked in October, rising from 2.7% Y/Y in Sept., to 6.8% in October, the highest since February 2016.
The other closely watched category, the level of quits - which indicates workers' confidence they can leverage their existing skills and find a better paying job - was unchanged in October, and was identical to the 3.18MM quits in September, suggesting little change to worker confidence about demand for their job skills. The number of quits was little changed for total private, for government, and in all industries. In the regions, the number of quits increased in the South and decreased in the Midwest.
And with a total 5.2 million separations (a 3.5% rate), this means that there were 1.6 million layoffs and discharges in October, little changed from September. The layoffs and discharges rate was 1.1 percent in Oct. The layoffs and discharges level increased in finance and insurance (+37,000) and in mining and logging (+7,000). Layoffs and discharges decreased in construction (-69,000) and in state and local government, excluding education (-15,000). The number of layoffs and discharges decreased in the Northeast region.
Putting all the data in context:
- Job openings have increased since a low in July 2009. They returned to the prerecession level in March 2014 and surpassed the prerecession peak in August 2014. There were 6.0 million open jobs on the last business day of October 2017.
- Hires have increased since a low in June 2009 and have surpassed prerecession levels. In October 2017, there were 5.6 million hires.
- Quits have increased since a low in September 2009 and have surpassed prerecession levels. In October 2017, there were 3.2 million quits.
- For most of JOLTS history, the number of hires (measured throughout the month) has exceeded the number of job openings (measured only on the last business day of the month). Since January 2015, however, this relationship has reversed with job openings outnumbering hires in most months.
- At the end of the most recent recession in June 2009, there were 1.2 million more hires throughout the month than there were job openings on the last business day of the month. In October 2017, there were 444,000 fewer hires than job openings.
Finally, and perhaps most notably, the Beveridge Curve (job openings rate vs unemployment rate), appears to be gradually normalizing after a nearly decade-long "drift" from its conventional pattern. 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. In October 2017, the unemployment rate was 4.1 percent and the job openings rate was 3.9 percent.