(Originally published here.)
Bureau of Labor Statistics jobs reports — such as Friday’s, which found that 175,000 more Americans were working in May than in April — are always interesting but never as helpful to analysts as you might think. Each month, millions of people are hired and fired, while millions of others quit their jobs to take new ones or retire.
Economists began to appreciate the importance of measuring these flows, which are far larger than the net number of jobs created or destroyed, in the early 1990s. The first major paper on the subject was published in 1991 by Christopher Pissarides and Dale Mortensen. (They later won the Nobel in economics for their work, along with Peter Diamond.)
Since the beginning of 2012, the number of new hires has been pretty constant between 4.2 million and 4.5 million. That compares to a pre-2008 average of about 5.1 million hires, although it’s a big improvement from June 2009, when just 3.6 million people were hired. This stagnation in hiring matches the data we have on job openings, which haven’t materially changed since February 2012.
Encouragingly, more people are willing to quit their jobs. This is one of my favorite indicators for gauging the state of the labor market. People in general won’t leave the job they have unless they think they can get a better one. Unsurprisingly, the number of quits plunged by about 43 percent during the recession. Quitting has become more common since then, although the quit rate is still lower than it was during the worst of the early 2000s recession. On the other hand, quits as a proportion of total job separations is at relatively healthy levels, thanks in part to a decline in firings.
Quits as a proportion of total job separations. Source: St. Louis Federal Reserve.
The Jolts data have two messages for policy makers: The labor market hasn’t improved as much as some would suggest, and we should be concerned by the stability of the hiring and quitting rates since the beginning of 2012.
(Matthew C. Klein is a contributor to The Ticker. Follow him on Twitter.)