Today’s release of the January Job Openings and Labor Turnover Survey (JOLTS) from the Bureau of Labor Statistics shows that the number of job openings decreased by 81,000 in January to 3.5 million. The softness in January’s JOLTS report despite the strength of January’s employment and unemployment report underscores that it is too soon to declare that we have entered a self-sustaining period of robust job growth.
The total number of unemployed workers in January was 12.8 million (unemployment data come from the Current Population Survey). Therefore the ratio of unemployed workers to job openings was 3.7-to-1 in January, unchanged from the revised December ratio of 3.7-to-1. Notably, despite steady improvements since its peak of 6.7-to-1 in July 2009, this ratio is still far higher than the highest rate of the early 2000’s downturn, which was 2.9-to-1. Furthermore, the lack of job openings relative to job seekers is not limited to particular industries. As this figure shows, unemployed workers dramatically outnumber job openings in every major industry.
The JOLTS report also revealed that in January, hires were down by 30,000 and layoffs were down by 39,000. Layoffs are now down to normal levels (the number of layoffs in January 2012 was 1.6 million, very close to the January 2007 level, 1.7 million). However, hiring is still very depressed (the number of hires in January 2012 was 4.2 million, compared with 5.3 million new hires in January 2007). This raises a question: If layoffs are normal but hiring is still so depressed, how could the labor market be adding jobs every month? The missing piece is the fact that voluntary quits are also currently very low. In January, the number of voluntary quits dropped by 36,000 to 2.0 million, and quits are still more than 30 percent below their pre-recession levels (for example, there were 3 million quits in January 2007).
All else equal, a larger number of voluntary quits represents a labor market where job opportunities are more plentiful and where employed workers have the chance to change to jobs that are a better match for their skills, experience, and interests and where they are more productive and command higher wages. The low level of voluntary quits underscores how the weakness of today’s job opportunities hurt not just unemployed workers but also workers with jobs. The lack of outside options reduces a crucial avenue for individuals to see wage growth (changing jobs). Furthermore, with limited outside options for their workers, employers do not have to substantially increase wages to keep the workers they need. The result has been a dramatic slowing of wage growth since the start of the recession.
With research assistance from Nicholas Finio and Hilary Wething