Wednesday, April 9, 2014

February JOLTS and March Labor Flows

JOLTS data continue to portray steady recovery.  Hires are still below the 2003 trough, which puts the hires indicator at about the same relative place as the current unemployment rate.  Job openings continues to grow and is back to the levels of 2005 when unemployment was down to 5%.  Quits continue to grow and are back to where they were in 2003 when unemployment was at 6%.

The slopes of all the series continue to be reliably positive, even if not particularly steep.

Flows have been updated through March, and they also continue to show positive trends.  Flows between Employment and Not-in-Labor-Force (NLF) are at a level similar to previous economic peaks, believe it or not.  Flows between Employment and Unemployment are also back to levels associated with unemployment rates at 6% or less, and with a strong bias for flows back into Employment.

The flows between unemployment and NLF are the set of flows that remain elevated.  This is a sign, I believe, of the large pool of long-term unemployed.  Trends in the unemployment rate and other indicators of economic strength over the near term will depend on the outcomes of this group of workers.  I have suspected that we would see a normalization of this group of workers after the end of EUI.  While long-duration unemployment hasn't accelerated downward since the beginning of the year, there does appear to be some downward acceleration in these flows.  In fact, over the last two months, as many unemployed workers became employed as left the labor force.  That's the first time that has happened since 2008.  But, generally, the long term unemployed/NLF group remains a bit of a mystery.

The last graph shows net flows between unemployment and both NLF and Employment, plus the total net outflows from unemployment since 2011.  I expected to see 2014 begin with small outflows from U to N and significant outflows from U to E.   Both flows would have created downward pressure on the unemployment rate.

Instead, we have seen the opposite.  (The pattern in November and December was out of Unemployment, but there wasn't an unusual decline in EUI beneficiaries before the program ended, so this is more likely statistical noise than a trend related to EUI.)  Net outflows to Employment have been slightly under trend and Net inflows from NLF to U have been significantly above trend.

Good news over the longer-term is that, while the net rate of workers leaving unemployment has been very steady at about 110,000 workers a month since the beginning of 2011, hidden in this net figure are two positive, but countervailing trends.  Net movement both back into the labor force and into employment have been trending up.

One last graph is a comparison of JOLTS data with the yield curve spread (10 year minus 1 year treasuries, inverted).  It would be nice to have JOLTS data going further back.  Somewhere, there is some sort of job openings data that goes further back.  Please let me know if you know where this might be free and available on the web.  Both JOLTS data and the yield curve appear to have some value as forward indicators.  The yield curve right now predicts that the yield curve spread will peak in about a year, at a little over 3%, then slowly flatten as we approach 2018-2019.  I don't quite know what to make of this coincident pattern, but it might be interesting to watch over time.

No comments:

Post a Comment