Because it was outdated by publication of the most recent payroll data for April 2021, the follow-up updated JOLTS estimates for March don’t end up having quite the same impact. In one sense, that’s unfortunate because they are once again providing another useful demonstration of the limitations over decoding the employment situation.
Job Openings (JO), for one.
Before getting to them, the various underlying data including general turnover via layoffs and quits does go back and undercut to some extent the preliminary monster Establishment Survey figure for two months ago. The latter was revised down to less than 800,000, and now the JOLTS “reconciliation” suggests that, as we’d expected, the original CES estimate was indeed more of an outlier (you can read about the methodology behind this here).
Hiring (HI) came in at 6.01 million for March which was up by a few hundred thousand but curiously not really that much, certainly nowhere near what that huge payroll figure had implied. Instead, what happened was layoffs and discharges (1.48mm) declined more than the increase in the number of workers voluntarily quitting (3.51mm). The difference between HI and the other two left a large positive net turnover gain of 1.02mm.
Applying the constant structural factor between this and the numerical monthly changes in payrolls (-300k), JOLTS here align much better with lower revised payrolls at 770,000 rather than the originally-rated 916,000 which had gotten the stimulus-rebound-is-massive-fire fired up.
We’ll have to wait until next month for the JOLTS estimates on April to see if they drop downward like the huge “miss” in payrolls.
It’s the HI part rather than JO’s which should get everyone’s attention, but never does. Companies just aren’t going gangbusters adding new employees (or rehiring former) despite the idea the labor market is somehow inflationary red hot. At 6.01mm in March, again the “good” month, this is seriously underwhelming hires activity:
That rate of HI was about the same as December 2019 when recession possibilities were still piling up. Following the COVID recession in 2020, and with the labor market still deeply depressed even after almost a year of rebound and reopening, why isn’t hiring more like the first couple months in May and June last year? It really should be a million or so better – and that would be just Reopening 2.
Though the estimate for April payrolls came out first, these HI figures from March are foreboding in the sense of how the former would come up so short.
Not so – says those carrying on the inflation case and its now-deepening tradition. Making the rounds again is the idea that what’s stopping employers from hiring at much higher rates each and every month is how those very same otherwise overly eager HR departments cannot locate and persuade enough candidates to come aboard.
After all, contained within the same JOLTS data package are those for Job Openings (JO), purportedly the top-notch measure of labor demand. For the month of March 2021, this other metric just went vertical:
Climbing to more than 8.1 million, by far a record, it wasn’t just up 41% year-over-year on base effects from March 2020, this was an eye-opening 7% better than the previous high set way, way back in November 2018.
And that particular month, if you recall, only brings back memories of this same exact debate. In 2018, not unlike 2014, the JOLTS JO number was used to justify the LABOR SHORTAGE!!!! narrative otherwise short on data (plenty of anecdotes). Relying on the identical mismatch between low levels of HI and huge levels of JO, like now it had been said then that companies wanted workers but they couldn’t find nearly enough of them.
The discrepancy became so large that it made its way into Jay Powell’s hawkish brew.
He, perhaps unlike many others, seems to have learned from what was – before September 2019 – his gravest error.
Not only had there been suspiciously little corroboration for the widely reported worker shortage, there had been plenty of similar data starkly indicating only its hype. The Conference Board, for one, published then and still does now a competing metric for practically the same idea – online help wanted ads (HWOL) as a proxy for commercial labor demand.
This other series had implicated JOLTS in overstating its figures during especially reflationary periods. For the month of March 2021, the base effects in HWOL would appear more realistic (+24% y/y) if they weren’t stacked against JOLTS JO nearly double them (+41% y/y).
Since this is clearly an ongoing issue for the BLS, understanding it more completely would require diving deep into its methodology – how, for instance, does the government ensure it isn’t double counting online ads ostensibly paid for the same job (across so many “online” platforms including social media). It seems entirely reasonable that this would account for JO’s penchant for overshooting which wouldn’t indicate any labor shortage whatsoever (just more ads per hire).
Perhaps it is that simple: technology changing the way companies do things and the government being less able to stay current.
What that means for April’s payroll estimate, as I wrote earlier the less than enthusiastic HI rate in March already proposes the same issues as we’ve been highlighting since last May which reared their ugly implications within last month’s Establishment Survey:
Either way, we’re right back to last year. Reopening is good, but that’s just never enough by itself. And if reopening while good isn’t nearly so good, certainly not quite as good as it seemed yesterday, then that tracks into the territory of more purely economic circumstances.
That’s not what will make its way into the mainstream, however, the same convention running rampant with the inflation narrative – very same one as 2018, mind you – given new life after the big miss in payrolls by this same kind of unsubstantiated, otherworldly surge in JO.
Because of this, you should expect to see a whole lot more mainstream stories, a ton more going forward, each and every one writing up anecdotes about which will assert the return of the LABOR SHORTAGE!!!! to “explain” all this. The inflation case demands nothing less; if there are questions in labor numbers, and there are a bunch, just like 2017-18, then it must be that businesses can’t find enough workers.
The balance of evidence, on the contrary, strongly suggests what’s actually red hot are again the fictional interpretations. What we’ll have to endure are claims that consistently low hire rates, like bond yields, cannot possibly mean what they obviously do and did each of the last few times we opened this same can of worms.
What we do know with reliable certainty is that the economy and labor market are each improving, but at this stage this late into the recession it only leaves us asking the question why isn’t it improving so much more, faster, and unambiguously?