Private Sector Hiring is Slowing Down

According to the Bureau of Labor Statistics JOLTS data (Job Opening and Labor Turnover Survey), private sector hiring, while still ahead of 2011, has slowed.  The JOLTS data record information on the number of persons hired by establishments and not merely total employment.  Thus the JOLTS data can provide information on whether companies are hiring new workers and replacing workers who have left their jobs or whether they are holding back on hiring.

According to the JOLTS data there were 12.73 million workers hired by private sector employers from August through October in 2012.  This represents only a 1.34% increase from the same three months in 2011.  The increases for 2009-2010 and 2010-2011 were 5.03% and 6.92% respectively, for the same three-month period.  Moreover the number of workers hired remains 16% lower than it was in 2007, before the recession.  Hiring in goods-producing industries (mining, construction and manufacturing) actually fell by 4.3% in the past year to the lowest level since 2009.

The slowdown in hiring may be due to uncertainty about the economy, including the budget negotiations in Washington.  Another sign that economic uncertainty may be impacting the labor market is that the pace at which workers are quitting their jobs has slowed down as well.

The number of workers quitting their jobs is an important indicator of how sure workers are that they can find a new higher-paying job.  When the labor market is booming more workers are willing to quit their jobs for better opportunities.  From 2009-2010 and 2010-2011 the number of private sector workers who quit their jobs increased by 12.2% and 9.7% respectively (based on data from August through October of each year).  In the past year the number of workers quitting their jobs increased by only 1.5% and remains about 26% below pre-recession levels.

The non-farm total payroll employment data from the BLS indicate that the economy has added about 136,000 private sector jobs per month over the past six months – or just enough to keep pace with population growth.  The JOLTS data indicate that the pace at which companies are hiring workers and the pace at which workers are quitting their jobs has slowed, after two years of solid increases in both hires and quits.

The labor market recovery is still fragile.  Both employers and workers may be holding back on decisions awaiting the outcome of Federal budget negotiations and the resolution of uncertainty about tax rates and government spending.  If the policy compromises by Congress and the President raise the cost of doing business, including the hiring and retention of workers, the gains in employment we have seen over the past two years could be reversed in 2013.

Durable Goods Manufacturers Struggle to Find Qualified Applicants

The typical job vacancy in durable goods manufacturing remains unfilled longer, on average, than at any time in the past decade.  This suggests that durable goods manufacturers struggle to find qualified applicants for their job openings as the economy slowly recovers from the deep recession of 2008 and 2009.  In contrast the average construction job vacancy remains unfilled half as long as it did during the construction boom because there are many qualified jobless workers for each job opening.  Construction employment fell by almost 30% between 2007 and 2010, and has not grown since January 2010.

The BLS JOLTS data report job openings at the end of each month and the number of persons hired per month, by major sector of the economy.  For example, there have been an average of 194,000 job openings in durable goods manufacturing at the end of each month, and 157,000 workers hired per month over the past three months.  This implies that the average job vacancy remains unfilled for about 38 days.  In contrast, at the depth of the recession in the fall of 2009 the average durable goods job vacancy remained unfilled for less than two weeks.  The following figure shows the average number of days a job vacancy remained unfilled over the past decade in three sectors impacted by the recession: construction, financial services and durable goods manufacturing.

 

The average job vacancy in financial services now remains unfilled for about 40 days compared to 25 days in the fall of 2009.  The financial services labor market had the least slack in the summer of 2006, when the typical job vacancy remained unfilled for about 7 weeks.

It was most difficult to hire a construction worker in the summer of 2007 when the average job vacancy remained unfilled for about 15 days.  In contrast, in the early fall of 2009, the average construction job opening remained unfilled for less than 5 days.

The average job vacancy in financial services now remains unfilled for about 40 days compared to 25 days in the fall of 2009.  The financial services labor market had the least slack in the summer of 2006, when the typical job vacancy remained unfilled for about 7 weeks.

It was most difficult to hire a construction worker in the summer of 2007 when the average job vacancy remained unfilled for about 15 days.  In contrast, in the early fall of 2009, the average construction job opening remained unfilled for less than 5 days.