After last Friday's disastrous jobs report and concurrent prior revisions, few were expecting any remarkable developments from "Yellen's favorite labor market indicator", the BLS' JOLTS, or Jobs Openings and Labor Turnover Survey, and yet there were two surprises.
First, when it comes to actual job openings, the number rose from a downward revised 5.675MM to 5.788MM, which meant the job opening rate remained flat at 3.9%, even if the actual number of job opening just matched the all time high of last July.
The biggest number of job openings were in the leisure and hospitality services industry, followed by accommodation and food services; retail trade; and education and health services, all the lowest or minimum wage paying jobs. Of note here was that Professional & Business Services openings fell a remarkable 274,000 in April. This may help explain the decline in both April and May temporary help payrolls
And while job openings continued rise, actual hiring slowed down substantially: at 5.092MM new hires in the month of April, this was the lowest since September of 2015. As the chart below, which correlates the 12 month change in NFPs to hires, the labor market may indeed be rolling over.
Netting out separations from hires, showed that net turnover of jobs - traditionally the equivalent series to the BLS' monthly establishment payrolls data - printed at only 104K, this was the lowest addition since June 2012. We expect next month's data to be even worse as it declines to match the 38K reported in May job gains.
Finally, all of this is summarized in the latest Beveridge curve below, which shows that something remains structurally broken with the work force as at this level of unemployment, the jobs opening rate should be at least one whole percentage point lower, suggesting wage pressures are building up. It is this slack that is resulting in so much confusion at the Fed, not to mention lack of wage growth.
This is how the BLS explains the above chart:
- The graph plots the job openings rate against the unemployment rate. This graphical representation is known as
the Beveridge Curve, named after the British economist William Henry Beveridge (1879-1963). The economy's
position on the downward sloping Beveridge Curve reflects the state of the business cycle. - During an expansion, the unemployment rate is low and the job openings rate is high. Conversely, during a contraction, the unemployment rate is high and the job openings rate is low. The position of the curve is determined by the efficiency of the labor market. For example, a greater mismatch between available jobs and the unemployed in terms of skills or location would cause the curve to shift outward (up and toward the right).
- 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. From 2010 to the present, the series has been trending up and to the left as the job openings rate increased and the unemployment rate decreased.
- In April 2016, the unemployment rate was 5.0 percent and the job openings rate was 3.9 percent, which is higher than the job openings rate before the most recent recession for the same unemployment rate.
As long as the Fed is intent on hiking rates during the above Beverdige Curve dislocation, it will find it has no choice but to stop and even reverse, until it finds the cause for why the US labor market remains broken.