Strongest JOLTS Print Of The Expansion

by: Bespoke Investment Group

Based on a very strong Employment Situation Report (including a large Nonfarm Payrolls gain) in December, we shouldn't be surprised that JOLTS was profoundly positive during the same month, but we were taken aback by just how strong some internals were.

First, total separations were moderate; we'll discuss the two offsetting factors below. The headline reading for gross job openings came in above expectations, accelerating sharply to near expansion highs, but these two readings belied the true strength in the details.

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The total job openings rate matched the all-time high recorded in July of 2015 (also the first print in this series, from January of 2001). This is positive, though the private openings rate remains below both all-time and post-recession highs. Again, openings (the headline figure) weren't where the real strength of this report lay, but the readings were definitely constructive.

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We've been waiting patiently for months to see quit rates accelerate as job openings have remained high and wage gains have accelerated. It's now happening, per December data charted below. Private quits soared 0.2 ppt MoM, to 2.4% and set a new post-expansion high. The Total quit rate also set a new high. Both rates are now consistent with the range from the last expansion; by this measure, labor markets have returned to "normal" status after years of sluggish recovery from the Great Recession.

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Even more encouraging, layoffs and other firings are back to all-time lows as a percentage of employment. Despite concerns over oil patch layoffs and headline job cuts from some major corporations, actual data show that employers are desperate to cling to labor in aggregate, with extremely low firing rates despite concerns over the economic outlook.

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Internals for low wage cohorts show even more constructive data with either new highs or dramatic improvements in the quit rate for workers with few prerequisites. This suggests strong labor demand, low labor availability, and wage pressures that have been evident in numerous private sector surveys for some time, including the NFIB Small Business series. Finally, looking at layoff and discharge rates by region, we can see that the current strength is broad-based on a geographic basis as national labor markets tighten.

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