This month’s Job Openings and Labor Turnover Survey (JOLTS) showed improvement across the board, with layoffs hitting a new all-time low, openings soaring, and the openings rate making another new high. The JOLTS survey continues to suggest labor markets are getting tight: there is greater demand for workers than there are workers available.
As shown below, total job openings surged to its second-highest recorded level: there are 5.133 million openings, the highest since January of 2001, when there were 5.273 million jobs unfilled.
Of course, the labor market has grown significantly since 2001 as the population has expanded. Therefore the openings rate is somewhat lower than it was in 2001 but is still at a fresh high since that period.
Despite large cuts announced in the oil patch, the private sector is firing workers at a historically low rate; only 1.1% of the labor force was laid off in the month of February, an astoundingly low number in historical terms and the second-lowest ever recorded, on par with October of 2013.
The one measure in the JOLTS report that we did not see tick higher was the quit rate; it actually declined month-over-month but remained in an uptrend off of recession lows.
In our recap of the monthly Employment Situation Report, sent to Bespoke Premium subscribers last Friday, we noted that while average hourly earnings ticked up, the bulk of the gain came from managerial employees. The chart below illustrates this effect.
The combination of the high AHE reading (driven by non-production and supervisory workers) and the JOLTS report suggests that labor market demand is focused in the specialized section of the labor market; this narrative also makes sense in the context of high openings rates. We think that eventually the rubber will meet the road: production and non-supervisory employees with less specialized skill sets (for instance, lower education levels) will eventually start jumping ship, increasing the quit rate and filling openings. Alternatively, wages will go up. The math here is pretty inescapable; the only question is when. It’s worth pointing out that last Friday’s low NFP number (126,000 versus 245,000 expected) can be partially explained by employers not being able to find workers that suit their needs, hindering jobs created. Of course, that optimistic outlook doesn’t explain the whole disappointment, but the February JOLTS data very much supports that explanation as part of the larger picture.