Wednesday, June 9, 2021

JOLTS, a Sleepy Economic Indicator, Jolts Awake

By Kelly Evans,

The Exchange, CNBC

Well, JOLTS certainly lived up to its name yesterday. This is typically one of the sleepiest economic indicators, despite its acronym (for the Job Openings and Labor Turnover Survey). It comes out way after the fact--yesterday's release was data for the ancient month of April--and it's not usually a headline-grabber.

Until now. My eyes certainly bulged when I saw the number. Nine-point-two million job openings?! I've never seen it that high before. It jumped by a million openings in just a month. This is truly bizarre. Not in the sense that I don't believe it--but in that the data are confirming something really, really different is going on out there.

Why so many job openings? It's peculiar to reflect upon. In the 2001-2007 expansion, there were never more than about five million in any given month. By 2010, after the great recession, openings had collapsed to fewer than three million and it took more than five years for them to return to their pre-crisis highs.

Since 2015, openings have been on a steady climb higher. From five million to six million to seven million to eight million by 2019--meaning the recent spike isn't just a post-pandemic phenomenon. It's an acceleration of the previous trend. So as I think it over, the pandemic seems to have sharply sped up the societal change that was gradually happening--the Great American Reset.

What change? Well, we all know the quality of internet video and video conferencing had been gradually increasing over the years. But suddenly, the pandemic showed that it could replace previous systems for how we live, and school, and work. No one wants to waste away all day in a corporate office. That's doubly true when both parents are working, and they have children--i.e., the millennials now. The share of both parents working with children hit 64% in 2019, up from 60% in 2015. The last time it was that high, coincidentally, was in 1999 and 2000--just before the dotcom crash.

So you're seeing this massive reshuffling now, as people who can have flexibility restructure--and improve--their lifestyles around it. For some, that means cashing in their homes, moving to lower-cost areas, and retiring early, as Glenn Kelman observed. For younger couples, that might mean one spouse can now permanently work from home--or even drop out of the labor force altogether, if it's paired with moving somewhere cheaper.

And it might not even be a bad thing for the economy in the long run. In fact, it's probably necessary, especially if better family balance helps stem the falling fertility rate. We've already basically returned the economy to its pre-pandemic size even with millions of workers on the sidelines. So while the Fed has been focused on getting labor force participation back up, lower participation in the years ahead based on family preference would be a totally different, much healthier thing.

That said, if companies still can't find workers once immigration fully normalizes and other Covid measures expire, it will slow down the economy. That's how you get "stagflation," which we're nowhere near right now with growth still booming. But bottom line, workers for a whole variety of reasons are saying to their old employers pay up, or I'll find something different to do. The quits rate also hit a new high in April and is 40% above its pre-pandemic average. YOLO, baby!

After the Great Recession, there were nearly seven unemployed workers for every single job opening in America. Five years after the downturn ended, there were still four unemployed workers for every opening. Today, per Goldman, there are more job openings than unemployed workers--less than a year after the pandemic recession. This is a very different environment.

And sure enough, like a cocooned caterpillar, there was actually much growth and change happening to the U.S. workforce while we were all forced inside to ponder our lives and experiment with new technology during the pandemic. We are reemerging as a much different, less constrained society.

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