Wednesday, December 14, 2011

Little dynamism in employment

Earlier this week, the Bureau of Labor Statistics released its monthly Job Openings and Labor Turnover report. Consistent with the recent modest growth in employment, the report showed that hiring rates slightly exceeded separation rates and that the job opening and hiring rates were substantially better than they were in the depths of the recession.

Rates of job openings are close to where they were near the end of the last "employment recession," which suggests that employment might be ready to pick up.

However, rates of hiring and separations remain far, far below their pre-recession values. In the mid-2000s, there were generally 5.0 to 5.5 million hires per month and slightly fewer separations. Over the last year, hiring has come in at around 4.0 million per month (again, with separations slightly lower). There has been only a slight trend upward in hiring rates since the bottom of the recession.

Much of the difference in job dynamics appears attributable to a fall-off in voluntary separations. In the mid-2000s, about 3 million people quit their jobs in an average month; currently, fewer than 2 million are quitting their jobs.

The changes indicate that the job market is much less dynamic than it used to be. Fear plays a role; in a weak economy, people are less likely to quit jobs unless they have something already lined up. The housing collapse may also be contributing; people who are underwater in their mortgages may not be able to move to places where there are better opportunities. The fall-off in wealth from the housing collapse and a weak stock market may be leading older workers to put off retirement.