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In May, the country gained a net of 54,000 jobs, and in April we gained 232,000. However, that is a very small fraction of the total number of jobs that were actually created. It subtracts out the number of jobs that were also destroyed in the month.

In any economic environment, there will always be jobs being created and jobs being lost. The difference between them is what gets the headlines. However, with a month’s delay we get to look a little bit deeper and see not just the net number of jobs created or lost, but the totals on each side of the equation. It also tells how many job openings there were in the economy.

This is in the “Job Openings and Labor Turnover Survey” or JOLTS. Today we got the JOLTS for April.

In March, the total number of job openings decreased by 4.9% to 2.972 million. This is after an increase in March of 3.3%. Relative to a year ago, job openings are up 15.8%. On the other hand, there were 13.75 million unemployed in April (rising to 13.91 million in May) so that means there were 4.63 people looking for each available job in April. While that is better than a year ago when there were 14.88 million unemployed and 3.043 million openings, for a ratio of 4.89 unemployed per opening, it still means it is tough to find a job.

Still, that is a major improvement from the peak of that ratio of 6.94 in July of 2009. The job openings a year ago were also a bit distorted by the hiring of temporary census jobs.

If just private sector jobs openings are considered, the number of job openings fell by 4.9% on the month and is up 10.9% year over year. That is very real progress, but we still have a long road ahead of us in getting the country back to work. The ratio is still more than twice what it was before the start of the Great Recession, even if it is down 33.3% from its July 2009 peak.

The graph below shows the ratio of unemployed to job openings. Clearly we have made some progress, but still have a long way to go before we get back to “normal.”



In April, the total number of people finding new jobs fell 2.34% from March to 3.972 million. On the other hand, the total number of people losing their jobs (for whatever reason) fell by 1.63% to 3.743 million. The difference between the total hires and total separations is 229,000, which is slightly below the 232,000 new jobs reported in the May jobs report for April (after revisions).

There is, however, always a little bit of statistical noise between the two surveys. Relative to a year ago, the number of total new hires is virtually unchanged (up 0.1%) and the total number of job separations is up 2.77%. On just the private-sector side, the number of people getting hired fell 2.55% on the month but is up 2.60% on the year, and the total number of job separations is down 2.24% for the month but up 3.35% year over year.

Total Government job openings were down 4.83% on the month, and are down 51.3% from a year ago (when openings for temporary census jobs were inflating the total). Government hires were up 0.77% on the month and down 26.20% from a year ago. Government job separations were up 5.90% on the month but down 3.69% year over year.

People leave their jobs for three reasons, they quit, they get fired or laid off, or what the JOLTS report describes as “other” (but is mostly retirements). When you dig down a little deeper, the news gets better, particularly on a year-over-year basis. There is a very big difference between getting a pink slip and telling your boss to “take this job and ...” In the latter case, most people already have another job lined up. If they don’t, it shows at least some confidence in the economy and their ability to get another job.

The graph below shows the number of job openings (yellow line), the number of people being hired (purple line), the number of people being laid off (or being fired or retiring, red bar) and the number of people quitting (blue bar). The difference between the purple line and the top of the stacked blue bar corresponds (roughly) to the number of net jobs gained or lost in the economy in that month as reported in the big employment report. Note that the yellow job openings line is now at its highest point since the fall of 2008.

Unfortunately, the JOLTS survey only goes back to 2001, so it is of limited usefulness in comparing where we are relative to coming out of other recessions. One thing, though, that jumps off the chart is that both the rate of new hiring and the total number of job losses are well below historical averages. In other words, the key reason so many people are out of work is a lack of hiring, not an excessive amount of firing.

You may note that the number of job openings is always lower than the number of hires. That is because the number of job openings is a snapshot of the last day of the month, while the number of hires is for the whole month. Thus a job opening that comes about in the month and is filled within that month shows up in the hires, but not in the openings.



Another thing to note is that during the worst of the economy losing net jobs in late 2008 and early 2009, the total number of layoffs soared much more than did the total number of job separations. When it looked like the entire economy was coming apart at the seams, the last thing you wanted to do was quit your existing job. That is changing fairly dramatically.

The number of people who quoted that Johnny Paycheck song to their bosses fell by 4.67% on the month and is down 3.95% year over year. As a percentage of all people leaving their jobs, it fell to 50% in April from 51% in March but is up from 48% a year ago. The decline in the number (and percentage) of quits is a troubling sign, but right now is still within the range of statistical noise. It is not, however, a trend we want to see develop.

One thing that is a bit troubling is that the number of job openings has risen much faster than the total number of new hires (not so much this month, but the general trend). This also appears to have happened following the 2001 recession as well, although it was a slower process and not as dramatic. Since the JOLTS report is relatively new, it is not possible to say if that relationship is normal coming out of recessions, or if it really is different this time.

Structural Unemployment?

There is a concern out there that some of the unemployment that we are seeing in the economy is turning into structural unemployment rather than just cyclical unemployment. That is not a view I happen to share, but there are some serious people, including some of the regional Fed Presidents who hold that view.

Structural unemployment occurs when there are mismatches between the jobs available and the abilities and locations of the workforce. A job opening for a nurse in Seattle does not do much good for a construction worker who is out of work in Phoenix. I see no particular reason why the skills mismatch would have increased dramatically over the past two years.

The one area where there has probably been a big increase in skills mismatches is in the construction industry. That industry has traditionally been a source of relatively high-paying jobs for those without a lot of formal education. Construction workers account for about a quarter of all job losses in the Great Recession, and they might have a particularly hard time finding work in other parts of the economy.

However, if there were a big structural mismatch, there would be some sectors of the economy where lots and lots of jobs are not being filled, and where wages were escalating rapidly as employers scrambled to find workers with the skills they need. With the exception of investment bankers, hedge fund managers, professional athletes and CEOs, I don’t see any sectors of the economy where that is the case.

The other major evidence against the unemployment problem being mostly structural is the very high unemployment rate among recent college graduates. It is not going to be the lack of a college degree that prevents them from getting a job, nor are they likely tied down from owning a house. Normally they are the most mobile segment of the population. Lack of aggregate demand seems a much more plausible reason they can’t find jobs.

There is a good reason, though, why the geographic mismatch would have increased. Historically, one of the great strengths of the U.S., especially relative to Europe, has been the geographic mobility of its labor force. Americans have always been a mobile people. If there are no jobs in Boston, we historically have pulled up stakes and moved to Austin. Europeans are far less likely to move from Athens to Amsterdam in search of a new job.

However, moving often involves selling your current home. If you are $50,000 underwater on your current place, it means that you have to bring a check for $50,000 to the closing when you sell your house (actually more when you factor in the realtor’s cut). If you have been out of work for several months, chances are it is going to be hard to scrape up that 50-large. Still, most of the high unemployment levels we are seeing stems from cyclical unemployment (a lack of aggregate demand) not from structural factors.

Discouraging Report - But a Little Stale

Overall, this report is discouraging, although it does deal with April, not May or June data, and it thus a bit stale. Still, April had a very strong BLS report, unlike the very weak one in May, but the underlying numbers for April were soft, so the May report could look very ugly.

The economy will always have jobs being created and jobs being destroyed, and at much, much higher levels than the net number between the two that everyone tends to focus on. In a healthy economy, most people who leave their jobs will be doing so of their own accord, because they think they can do better elsewhere, not because the office is shutting down or drastically reducing the work force.

The fall in job openings is bad news, as is the decline in the percentage of people who leave their jobs voluntarily. We still have far more people looking for work than there are jobs available, and in April, that problem got worse not better, although things are still better than a year ago, especially if you back out the temporary census effect.

The overall level of job turnover is still very low. We do not have a problem with people getting laid off. In fact, that figure is at an all-time record low, although the record does not go back all that far.

The problem is that relatively few new jobs are being created. That means that people with jobs can feel pretty secure, but that those who are out of work are -- for the lack of a more technical term -- screwed. The number of very-long-term unemployed should be a national scandal, or at least something that people in Washington DC cared about.

It is not really plausible to bring the long-term deficit under control unless both the spending and revenue sides of the equation are addressed. Those who insist that no taxes can be raised on anyone, or even the spending that occurs through the tax code cut (special credits and deductions) cannot really be considered serious about deficit reduction.
 
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