I want to return to this chart from MacroBlog:
Here is an explanation of the above chart from Macroblog:
The circle at the perimeter of this chart represents labor market conditions that existed just before the recession. We have dated this as late 2007. The inner circle represents the state of affairs when payroll employment reached its trough in late 2009. The oddly shaped red figure inside the perimeter depicts where each of the indicators was in March 2011 relative to the benchmarks. The purple figure depicts the state of the labor market in March 2012. Finally, the blue figure shows where the indicators were as of March 2013. All of the indicators are scaled so that outward movement represents improvement. The progression of these point-in-time snapshots provides us with a picture of how labor market conditions have evolved over the past four years.
As you can see, substantial improvement has arguably been achieved in the leading indicator series. As a group, these data points are approaching their prerecession levels. Employer hiring behavior and confidence are slowly moving outward but remain quite weak relative to their prerecession benchmarks. Finally, the labor utilization measures are very weak and, notably, have hardly improved at all over the past two years.
As I previously mentioned, I think this is the best chart on employment out there, largely because it shows how complicated this concept is. Unfortunately, we (Bonddad Blog included) tend to only focus on two employment statistics: weekly unemployment claims and the monthly jobs report. And the monthly jobs report has become subject to a fair amount of political skew at the expense of actual analysis. In contrast, the above chart recognizes there are numerous factors and statistics that go into a full interpretation of the jobs market and what is actually happening.
As the writers at MB note (see above), the leading indicators in the above chart are good. Temporary hires are rising and initial claims are dropping. These two numbers are a big reason why many people (myself included) have been bullish about the jobs market.
However, there is a fair amount of data that suggests that bullishness is not warranted -- or at least, should be pretty severely tempered. The reason for this is twofold with the first number being employer behavior as measured in the JOLTs survey. First, let's get an overview for what's involved with JOLTs:
The Job Openings and Labor Turnover Survey (JOLTS) produces monthly estimates of job openings, hires, quits, layoffs and discharges, and other separations. JOLTS data help measure the demand for labor (employers' need for employees) and track the health of the economy.
So, as the MB graph notes, this survey shows what employers are doing (not what they're saying) on the employment front. In short, it shows us demand for labor.
Consider this chart of total job openings:
First -- there isn't a lot of data here to compare the current totals to. While that is a shortcoming, at least we have something.
Second, here's a definition of job opening (the variable being measured above) from the BLS Glossary: A specific position of employment to be filled at an establishment; conditions include the following: there is work available for that position, the job could start within 30 days, and the employer is actively recruiting for the position.
As the chart shows, the total openings dropped sharply as a result of the great recession, with total openings falling to ~2 million. This is 800,000 below the lowest level of the previous expansion, which was preceded by a fairly mild recession. (It should also be noted that the jobs market in the previous expansion was also pretty weak; for the first few years, it too was also referred to as a jobless recovery).
The number increased from the end of 2009 to 2012. However, the number didn't hit the 2.8 million level (the lowest point from the previous expansion) until midway through 2011. So, the current expansion was far weaker than the previous expansion (which was also very weak) for the first three years of the current recovery.
That leads to the question: why do we have this weakness in the JOLTs job opening survey? For that answer, we have to turn to the National Federation of Business' small businesses monthy business survey, and most importantly, this chart: