JOLTS Are Looking Good

Jolts are not an external shock to the economy. Rather, Jolt is an an acronym for job openings and labor turnover and is prominent on Chairman Yellen’s labor market dashboard. That’s good because Jolts are looking good.

The first Friday of the month employment changes are net numbers which obscure much of the dynamics of the labor market that show up in gross numbers. A modest net change in employment may obscure very large increases and declines in employment and give the false impression that nothing much is going on.

The Bureau of Labor Statistics released the report on the JOLTS survey for June yesterday and it was very positive:

“Large numbers of hires and separations occur every month throughout the business cycle. Net employment change results from the relationship between hires and separations. When the number of hires exceeds the number of separations, employment rises, even if the hires level is steady or declining. Conversely, when the number of hires is less than the number of separations, employment declines, even if the hires level is steady or rising. Over the 12 months ending in June 2014, hires totaled 55.7 million and separations totaled 53.3 million, yielding a net employment gain of 2.4 million.”

2.4 million net new jobs sounds relatively small until you realize the massive number of hires and separations they represent. The churn is definitely with us.

Separations can be voluntary (quits) or involuntary (layoffs and discharges). The quit rate has been rising relative to total separations, which is considered positive because it supposedly reflects new jobs or optimism that the quitter can find a new job. In other words, it supposedly reflects a more positive view of the labor market. Nevertheless, the expansion of job growth reflects more new hires rather than fewer separations. The new hires, in turn, reflect an increase in job openings.

The churn, reflected in the JOLTS survey, keeps the economy reinvigorated by allowing it to constantly reinvent itself.

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