Let’s talk about the job market for a second.
Last year we did a piece on the ‘Quits to Separation’ ratio. Following the strategy of watching what people do instead of listening to what people say, this ratio reveals the true thoughts of the aggregate labor market. When people are confident that the market is strong, you’ll see more quits. When the job market is weak (such as during the Great Recession) layoffs and firings will account for more job separations, driving the ratio down.
The report to follow is the Job Openings and Labor Turnover Survey from the BLS (affectionately known as JOLTS). The most recent report indicated that, yes, job seekers think the job market is strong. Take a look yourself:
A High Ratio of Quits to Total Separations
The indicator is currently sitting at 60.3% – that is to say, less than 40% of job separations are due to firings, layoffs, and other unpleasantness. While there certainly are layoffs ongoing in some niches, that’s obviously a strong print – other than a brief spike last December, it hasn’t read over 60% since June 2006.
As you know, history doesn’t repeat itself, but it does rhyme. It’s worth looking at historical prints (although the report itself doesn’t go back too far!).
The ratio stayed over 55% through February 2008 when we were already into what came to be known as the Great Recession. It later bottomed out at a shockingly low 37.3% in April 2009. Since then, we’ve seen a steady uptrend as more and more job seekers test the job market.
Rising Tide, Meet Boats
And yes, folks, that’s good for everyone. A high ratio and a tight job market is great for employees – even those that choose not to test the waters on their own.
Between a stable job market and rising household incomes, we’re actually experiencing some very good times in the job market. Yes, there are problems in some areas of the economy, and yes not every industry is sharing all the benefits.
But in aggregate, the market is strong.
Winter may eventually be coming and the tide may recede, but not quite yet. We’ll continue to monitor the job market in general and JOLTS in particular – I encourage you to do the same!
What’s your favorite job market indicator?