101216-jolts-seasonalityJob openings in the US labor market unexpectedly plunged 388,000 in the month of August to a mutli-month low of 5.443 million versus expectations for a new all-time high of 5.8 million openings. The decline is the largest since August of last year and the widest miss versus expectations since at least July of 2011 when our data begins. We noted that last year, extremely strong July listings (+680,000 MoM) were followed by a similar August swoon when listings fell 480,000 sequentially. That got us curious. At right, we show the 2016 MoM change in openings by month, along with the average MoM change for that month over the last five years. As shown, there’s a clear seasonal pattern in the openings releases, with every month this year following the same directional pattern as the five year average. That’s despite seasonal adjustment by the Bureau of Labor Statistics. In that context, August is the weakest month of the year seasonally for this release, and lived up to its billing in 2016. With this seasonal pattern in mind, we don’t see this report as a turning point for the rise of openings. We’ll discuss some other evidence later in the post. As a final note, keep in mind that when openings decline by >100,000 MoM (since July 2011), subsequent revisions average +63,000, so this number is quite likely to be revised higher in coming releases.

Because the layoffs rate is near all-time lows, total separations are at a relatively low level. Quits are also low, helping push this number sideways for the last two years; again, more on that below.

With the number of openings falling sharply, the openings rate plunged to 3.6%, down 0.3% sequentially. Private openings rates saw more modest declines, but are still moving largely sideways over the past two years.

One reason we see this report as suspect due to seasonal adjustment is no decline in quit rates MoM; if employers were pulling back from the labor market in a significant way we would expect at the least a lower quit rate, but it was unchanged from July for both the total labor market and the private sector.

Layoffs also remain extremely low. While we wouldn’t necessarily expect a huge uptick given the numbers on the openings front, both total and private-only layoff/discharge rates are at the lowest levels in the history of the JOLTS survey.

A similar story is found at the industry and geographic level. None of the four key industries we keep an eye on for quit rates rose sequentially, and Construction quits actually ticked higher. Geographically, there was also a strong showing from layoff/discharge rates which are not consistent with falling labor demand that lower openings might indicate.


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