Job openings, hires, and separations return to prerecession levels in 2015

Data from the Job Openings and Labor Turnover Survey (JOLTS), conducted by the U.S. Bureau of Labor Statistics, showed labor market activity returning to prerecession levels in 2015 for several major indicators of the state of the economy, including hires, separations, and quits. Job openings reached 5.8 million in July, a series high for this indicator at the time; the average for the year was 5.3 million. Hires, with an average level of 5.1 million, exceeded their November 2007 prerecession level for the last 3 months of the year. In a reversal of historical patterns, job openings exceeded hires for 9 months in 2015. Total separations also approached their November 2007 prerecession level throughout the year and exceeded that level in December 2015; average total separations were 4.9 million for the year. The growth in total separations was pushed by a large increase in quits, which were up 11.5 percent in 2015. Quits averaged 2.8 million over 2015 and returned to prerecession levels for 4 of the last 5 months of the year.

Job Openings and Labor Turnover Survey

JOLTS measures job openings, hires, total separations, quits, layoffs and discharges, and other separations on a monthly basis. (See accompanying box.) Through a sample of approximately 16,000 nonfarm business establishments from all 50 states and the District of Columbia, JOLTS estimates labor demand and worker flows by industry¹ and geographic region.²

This article reviews JOLTS estimates from 2014 and 2015 and assesses how these measures have fared since the most recent recession. First, JOLTS data from 2015 are compared with JOLTS data from previous years by element (job openings, hires, total separations, quits, layoffs and discharges, and other separations). Also, the JOLTS data elements are analyzed together and compared with data from other statistical series, including the Current Employment Survey (CES) and the Current Population Survey (CPS). The comparisons made will frequently include November 2007, the month before the most recent recession started, and June 2009, the last month of the most recent recession.³ Except for annual data, all JOLTS data used in this report are seasonally adjusted.

Job openings

After increasing steadily since the end of the most recent recession, job openings levels reached a series high of 5.8 million in July 2015. (See figure 1.) Job openings rates also reached a series high (3.9 percent) in July 2015, matching a previous high reached in January 2001. Job openings levels decreased by 41.1 percent during the recession, but increased by 117.5 percent between June 2009 and December 2015. Job openings rates decreased by 37.9 percent during the recession, then increased by 100.0 percent between June 2009 and December 2015. The average level of job openings in 2015 was 5.3 million, an increase of 16.4 percent over the 2014 average of 4.6 million. (See table 1.) Annual levels of job openings have increased steadily each year since 2009. (See figure 2.)

Job openings by industry and region

Within the industries, the largest increases in average annual job openings levels between 2014 and 2015 were in real estate and rental and leasing (37.8 percent); health care and social assistance (25.5 percent); professional and business services (24.6 percent); educational services (19.9 percent); and transportation, warehousing, and utilities (19.8 percent). All other industries also posted increases in job openings, except for mining and logging (–42.6 percent) and arts, entertainment, and recreation (–9.0 percent). Increases were similar in all four census regions, ranging from 15.6 percent in the South to 17.2 percent in the Midwest.

Hires

Hires have increased steadily each year since the end of the recession. (See figure 3.) After decreasing by 26.0 percent during the recession, hires levels increased by 47.0 percent between June 2009 and December 2015. Hires rates decreased by 22.2 percent during the recession and then increased by 35.7 percent between June 2009 and December 2015. Hires levels reached their November 2007 level of 5.2 million in December 2014 and were at or above that level for the last 3 months of 2015. Hires rates returned to the November 2007 rate of 3.7 percent in October 2014 and were between 3.6 percent and 3.8 percent for all of 2015. In 2015, hires averaged 5.1 million, an increase of 5.2 percent over the 2014 average of 4.9 million. (See table 2.) Annual levels of hires have increased every year since 2009. (See figure 4.)

Hires by industry and region

Within the industries, the largest increases in average annual hires levels between 2014 and 2015 were in federal government (22.8 percent), state and local government education (15.6 percent), other services (10.7 percent), and accommodation and food services (10.6 percent). All other industries experienced growth as well, except for mining and logging (–21.4 percent), wholesale trade (–4.2 percent), real estate and rental and leasing (–2.9 percent), and educational services (–0.8 percent). Increases in hires varied from a low of 4.0 percent in the West to 9.2 percent in the Northeast.

Total separations

Total separations, a measure that includes quits, layoffs and discharges, and other separations, have increased slowly compared with both job openings and hires since the end of the recession. (See figure 5.) After decreasing by 14.9 percent during the recession, total separations levels increased by 22.3 percent between June 2009 and December 2015. Total separations rates decreased by 11.1 percent during the recession and increased by 12.5 percent between June 2009 and December 2015. Total separations were at or near their November 2007 level (5.0 million) throughout 2015 and exceeded that level in December 2015. Rates were close to their November 2007 rate of 3.6 percent throughout 2015, ranging from 3.4 percent to 3.5 percent each month before reaching 3.6 percent in December 2015. The average monthly level of total separations in 2015 was 4.9 million, an increase of 6.0 percent over the 2014 average of 4.6 million. (See table 3.) Annual levels of separations have increased each year since 2010. (See figure 6.)

Total separations by industry and region

Within the industries, the largest increases in average annual total separations levels between 2014 and 2015 were in mining and logging (23.4 percent), federal government (20.9 percent), state and local government education (17.2 percent), durable goods manufacturing (12.0 percent), accommodation and food services (11.2 percent), and other services (10.7 percent). All other industries also had higher total separations in 2015 than in 2014, except for wholesale trade (–3.5 percent); arts, entertainment, and recreation (–0.9 percent); and real estate and rental and leasing (–0.5 percent). Increases in total separations ranged from 5.4 percent in the Northeast to 6.4 percent in the South.

Quits

Quits have shown strong growth since the end of the recession. (See figure 7.) After decreasing by 36.2 percent during the recession, quits levels increased by 73.3 percent between June 2009 and December 2015. Quits rates decreased by 30.0 percent during the recession, but increased by 57.1 percent between June 2009 and December 2015. With this growth, in September 2014 quits reached their November 2007 level of 2.8 million for the first time since the recession. Quits levels were at or above their November 2007 level for 4 months during 2015. Quits reached their November 2007 rate of 2.0 percent in September 2014 and were at or above that rate for 5 months during 2015. The average monthly quits level in 2015 was 2.8 million, an increase of 9.2 percent over the 2014 figure of 2.6 million. (See table 4.) Annual levels of quits have increased each year since 2009. (See figure 8.)

Quits by industry and region

Within the industries, the largest increases in average annual quits levels between 2014 and 2015 were in federal government (21.8 percent); state and local government education (16.9 percent); durable goods manufacturing (16.8 percent); and transportation, warehousing, and utilities (15.9 percent). Other industries experienced a rising number of quits as well, except for mining and logging (–6.0 percent) and real estate and rental and leasing (–4.9 percent). Increases in quits ranged from 8.5 percent in the South to 13.0 percent in the Northeast.

Layoffs and discharges

Layoffs and discharges began to decrease toward the end of the recession and have leveled off since mid-2011. (See figure 9.) After increasing by 19.5 percent during the recession, layoffs and discharges levels decreased by 20.9 percent between June 2009 and December 2015. Rates of layoffs and discharges increased by 23.1 percent during the recession and then decreased by 25.0 percent between June 2009 and December 2015. Average monthly layoffs and discharges were 1.7 million in 2015, similar to the 2014 figure. (See table 5.) Annual levels of layoffs and discharges have been fairly steady since 2010, with small increases during the last 2 years. (See figure 10.)

Layoffs and discharges by industry and region

Within the industries, the largest increases in average annual layoffs and discharges levels between 2014 and 2015 were in mining and logging (69.0 percent); state and local government education (26.3 percent); state and local government, excluding education (23.6 percent); other services (22.6 percent); and accommodation and food services (17.5 percent). Other industries had a mix of increases and decreases, with the largest decreases exhibited by health care and social assistance (–17.3 percent); wholesale trade (–9.0 percent); and arts, entertainment, and recreation (–6.0 percent). Changes in layoffs and discharges varied by region: layoffs and discharges decreased by 2.5 percent in the Northeast, while the other regions experienced increases in this measure, with a high of 4.1 percent in the Midwest.

Other separations

Other separations levels have shown little variation throughout JOLTS history, ranging from about 250,000 to 500,000 (see figure 11), with a series average of 353,000. Rates have also shown little variation, generally ranging from 0.2 percent to 0.3 percent. Other separations levels decreased by 18.7 percent during the recession and increased by 24.7 percent between June 2009 and December 2015, while rates decreased by 33 percent during the recession and increased by 50 percent between June 2009 and December 2015. Average monthly levels of other separations numbered 382,000 in 2015, close to the measure’s 2014 average. (See table 6.) Annual levels of other separations have increased since 2011, but dropped slightly between 2014 and 2015. (See figure 12.)

Other separations by industry and region

Within the industries, the largest increases in the average annual level of other separations between 2014 and 2015 were in federal government (27.7 percent); arts, entertainment, and recreation (25.0 percent); information (23.6 percent); and construction (17.4 percent). Other industries had a mix of increases and decreases, with the largest decreases posted in nondurable goods manufacturing (–22.2 percent), finance and insurance (–19.9 percent), and mining and logging (–16.2 percent). Changes in other separations varied by region, with increases in the Northeast (3.8 percent) and the South (1.9 percent) and decreases in the Midwest (–6.4 percent) and the West (–2.0 percent).

Job openings and employment

Job openings are a procyclical⁴ measure of labor demand. During an economic expansion, employers demand more labor, increasing the number of job openings while adding to employment levels. By contrast, during an economic contraction, employers demand less labor, reducing the number of job openings while subtracting from employment levels. As a result of procyclicality, job openings and CES⁵ employment figures tend to follow a similar pattern, with job openings leading employment slightly during both upturns and downturns of the business cycle. (See figure 13.)

This dynamic can be seen during the most recent recession. Job openings peaked at 4.8 million in April 2007, but declined to 4.1 million in December 2007, the first month of the recession. CES employment peaked later, at 138.4 million in January 2008. Both then declined rapidly during the recession. Job openings reached a low of 2.2 million in July 2009, the month following the end of the recession, but then began to increase, although employment continued to decline, to a low of 129.7 million in February 2010.

Unemployed people per job opening

Another way to analyze job openings and unemployment is to consider the ratio of unemployed people per job opening. This ratio is calculated by dividing the number of unemployed from the CPS⁶ by the number of job openings. Job openings and unemployment levels generally move in opposite directions. That is, when the economy is strong, job openings are high and unemployment is low, and the ratio decreases. The situation reverses during a contraction, as the economy weakens and unemployment increases while job openings decrease, leading to a higher ratio. Because of this countercyclical behavior, the ratio of unemployed people to job openings provides a metric that helps to describe the state of the economy. (See figure 14.)

When the most recent recession began in December 2007, the number of unemployed people per job opening was 1.9. The ratio peaked at 6.6 unemployed people per job opening in July 2009, the month after the recession ended, and has trended down since. In 2015, the ratio of unemployed people per job opening ranged from a high of 1.8 to a low of 1.4. The average monthly ratio was 1.6 in 2015, down from 2.1 in 2014.

Beveridge curve

The Beveridge curve⁷ plots the intersection of the job openings rate and the unemployment rate. Each point on the downward-sloping curve reflects the state of the business cycle, with the unemployment rate plotted on the x-axis and the job openings rate plotted on the y-axis. During an expansion, the unemployment rate is low and the job openings rate is high, so the monthly point on the curve is expected to be up and to the left on the graph. Conversely, during a contraction, the unemployment rate is high and the job openings rate is low, so the monthly point on the curve is expected to be down and to the right. (See figure 15.)

The Beveridge curve provides a way to analyze the inverse relationship between unfilled labor demand (measured by job openings) and excess labor supply (measured by the unemployment rate), because the position of the curve is determined by the efficiency of the labor market. Between December 2000, when the JOLTS program began, and August 2009, the Beveridge curve followed a relatively constant pattern. With the start of the most recent recession in December 2007, through the end of 2009, the series trended predictably lower and further to the right as the job openings rate declined and the unemployment rate rose. However, in September 2009, the curve began to shift up and to the right, away from the historical trend. Since then, the curve has stayed up and to the right of the historical curve, following a new trajectory as the job openings rate has increased and the unemployment rate has decreased. The trajectory continued to the right of the original curve throughout 2015.

The shift of the Beveridge curve since September 2009 is a result of employers hiring fewer workers per job opening than would be expected from historical patterns. The cause of the shift, however, is subject to debate and includes cyclical, structural, and other factors. In 2012, Bart Hobijn and Ayşegül Şahin found that the displacement of a large part of the labor force during the recession resulted in a decline in efficiency in matching workers with jobs. This decline, together with the extension of unemployment insurance (UI) benefits during the recession, led to the shift.⁸ Also in 2012, Regis Barnichon, Michael Elsby, Hobijn, and Şahin hypothesized that a mismatch in skills required by employers and skills possessed by employees, along with a decline in recruiting intensity by employers facing uncertainty and search intensity by employees with longer periods of UI benefits, could have contributed to the shift.⁹ Two years later, another study, by Alan Krueger, Judd Cramer, and David Cho, found that long-term unemployment increased during the recession, and the authors theorized that the slower rate of reemployment of the long-term unemployed could account for the shift.¹⁰ That same year, Peter Diamond and Şahin argued that historical evidence indicates that a shift in the Beveridge curve following a recession is natural and should be interpreted as a cyclical pattern.¹¹ The general consensus among these papers is that the current shift is temporary and the points will eventually move back toward the original curve.

Job openings and hires

The monthly levels and rates of total nonfarm hires have exceeded those of job openings for most of JOLTS history. (See figure 16.) The primary reason is that job openings are a stock measure, meaning that they are counted only on the last business day of the month, whereas hires are a flow measure that includes the entire month of activity. However, following steady growth after the end of the recession, job openings started to grow rapidly in early 2014. At the same time, hires also grew, but at a slower pace. As a result, job openings levels exceeded hires for the first time in August 2014. Also in August 2014, the job openings and hires rates were the same for the first time in the series history. Periods during which job openings exceed hires may indicate that employers have unmet demand for workers. In February 2015, job openings levels exceeded hires and remained elevated for most of the year while the job openings rate was at or above the hires rate for 6 months of 2015.

Within the industries, the historical dynamic between hires and job openings levels has varied. Hires have almost always been greater than job openings in mining and logging; construction; nondurable goods manufacturing; retail trade; real estate and rental and leasing; professional and business services; arts, entertainment, and recreation; accommodation and food services; and other services. In other industries (durable goods manufacturing; wholesale trade; transportation, warehousing, and utilities; and educational services), the dynamic has gone back and forth over time, with hires exceeding job openings in some months and staying below them in other months. Job openings have regularly exceeded hires in information, finance and insurance, and health care and social assistance.

Job openings grew at a faster rate than hires in almost all industries between 2014 and 2015. (See table 7.) The largest difference was in real estate and rental and leasing, with hires decreasing by 2.9 percent and job openings increasing by 37.8 percent. Hires also decreased (by 4.2 percent), and job openings increased (by 10.5 percent), in wholesale trade. In most industries, both hires and job openings increased, with job openings recording the larger increase. The largest increases in job openings that were not offset by an increase in hires were in educational services; professional and business services; transportation, warehousing, and utilities; and health care and social assistance.

Hires and separations

Analyzing hires and separations together provides a more complete picture than analyzing each separately, because the combined analysis demonstrates worker flows. Hires are a procyclical measure, increasing during expansions and decreasing during recessions. Total separations are more complex, and each component can provide information about the economic climate. Quits, which are voluntary separations and measure workers’ ability or willingness to leave their jobs, are also procyclical. Layoffs and discharges, which are involuntary separations initiated by the employer, are countercyclical. Other separations are a relatively small part of total separations and are unlikely to influence any overall trend in total separations.

Hires have generally outnumbered total separations, except during the recession, when there were more separations than hires. (See figure 17.) The reason for the reversal was a combined decrease in hires and increase in layoffs and discharges, with the latter leading to an increase in total separations despite a decrease in quits. In 2015, hires and total separations showed similar patterns: hires increased 6.9 percent, and total separations increased 5.0 percent, between January and December.

Within total separations, quits are generally greater than layoffs and discharges. (See figure 18.) The only year during JOLTS history in which average layoffs and discharges outnumbered quits was 2009. Since then, quits (as a percentage of total separations) have increased each year while layoffs and discharges (also as a percentage of total separations) have decreased each year. In 2015, the difference between quits and layoffs grew: quits increased 11.5 percent, and layoffs and discharges decreased 4.8 percent, between January and December.

Conclusion

JOLTS data for 2015 show that the labor market continued to improve throughout the year. Job openings increased to the highest levels seen since the series began in 2000, indicating further increases in demand for labor. Hires and quits grew steadily over the year, with both returning to levels last seen in November 2007 by the end of the year. This increase in jobs and worker flows is likely indicative of growing confidence on the part of employers and workers, with employers becoming more willing to hire and workers having sufficient incentives to leave their current positions.