Labor Turnover

By Tasci, Murat; Mowry, Beth | Economic Trends, February 2009 | Go to article overview

Labor Turnover


Tasci, Murat, Mowry, Beth, Economic Trends


02.02.09

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The Bureau of Labor Statistics tracks the hiring and firing activity of establishments across the nation in its Job Openings and Labor Turnover (JOLTS) series. One important statistic from JOLTS is the net hires rate, the difference between the hires rate and the separations rate. A positive net hires rate indicates an increase in aggregate employment across establishments. Up until May 2008, the net hires rate had been positive for almost five years.

More recently, other JOLTS statistics have been painting a clearly deteriorating picture of the labor market. This is true of turnover numbers, such as separations and hires, as well as labor demand measures such as job openings. Aggregate hires registered their largest decline in November 2008 (607,000) and now stand at an all-time low of 3,548,000. Similarly, job openings declined 208,000 in November--their lowest level since September 2003.

One well-known problem with the JOLTS dataset is that it overestimates net job creation relative to the Current Employment Survey (CES). Hence, a change in the net hires rate may not imply a similar change in CES payroll numbers from one month to the next. For instance, the CES entered negative territory in January 2008, while JOLTS implied net employment gains until four months later. Nevertheless, JOLTS provides our only measure of aggregate turnover, and more importantly, job openings data.

Since the beginning of the JOLTS series, there have been two clear downturns in aggregate employment. She first was from December 2000 to June 2003, and the second is the ongoing downturn that started in January 2008. When we look at the behavior of labor turnover and ,job openings in both of these downturns and the expansion in between, several patterns emerge.

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First of all, for the aggregate economy, average monthly job openings, separations, and hires were all higher in the expansion than in either downturn. At the sector level however, this is not always the case. A secular increase in the education and health services sector, for instance, provided robust growth and reallocation in the sector over time. In fact, the demand for workers in this sector, as measured by job openings, was higher during the downturns than in the expansion.

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We also see the effects of a booming housing sector in the data on construction jobs for the first seven years of the series. More specifically, hires and separations were very stable between the first downturn and the following expansion. However, as the problems grew in the housing sector, construction employment declined, as did the demand for workers and overall turnover.

Even though it is far from complete, the current downturn shows a lot of similarity with the previous one with respect to measures of turnover and job openings. Average monthly hires and separations are about the same in the aggregate and in some sectors (such as mining; trade, transportation, and utilities; and education and health services). Even though total job openings have been higher on average in the current downturn, they have stayed at relatively the same level for some sectors, most notably for manufacturing. However, we need to be cautious here, since low demand for labor might persist for some time, significantly changing the picture.

It is often hard to get a meaningful understanding of labor turnover by looking at monthly levels of hiring, separations, and job openings in isolation of the broader trends. …

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