Economic Growth

How healthy is the US labour market?

Nick Bunker
Policy Analyst, Washington Center for Equitable Growth

This article is published in collaboration with Washington Center for Equitable Growth.

As the end of the seven years of zero percent short-term interest rates in the United States seemingly draws to a close, it’s time to take another look at the U.S. labor market and its continuing recovery from the Great Recession.

The widely covered Employment Situation report from the U.S. Bureau of Labor Statistics shows a 5 percent unemployment rate, steady employment growth, and nominal wage growth that is above its over-five-year level of 2 percent annual growth (although still well below healthy levels). But the bureau’s Job Openings and Labor Turnover Survey, also known as JOLTS, has become an increasingly popular dataset for measuring the health of the U.S. labor market, after Federal Reserve Chair Janet Yellen highlighted it in aspeech back in 2013.

So what does the most recent JOLTS release say about the U.S. labor market?

Let’s start with the good news: The job openings rate has been growing quite strongly during the U.S. labor market recovery. The openings rate (the number of job openings divided by total employment plus the number of openings) can be interpreted as a measure of labor demand—an employer posting a job opening is signaling they want to hire someone in the relative future. A few months ago, this rate hit its highest level since the first JOLTS release in late 2000 (3.8 percent), and it is now above its pre-Great Recession level (3.6 percent).

Unfortunately, the openings rate seems to be the outlier among the JOLTS data. While openings have been on a tear, the rate at which businesses are hiring hasn’t increased nearly as quickly. The current hiring rate (3.6 percent) is decidedly below its pre-recession peak of 3.9 percent to 4.0 percent, and has essentially stayed flat since September 2014.

This divergence can be interpreted in a number of different ways. Among them is the hypothesis that workers don’t have enough skills to meet the demands of employers. But the lack of strong wage growth—a sign of employers competing for limited talent—is a point against that story. Another possible explanation is that a shift in bargaining power toward employers has made them more willing to create openings, all other things being held constant.

But the hiring rate isn’t the only JOLTS statistic that has stalled over the last year. The quits rate has been at 1.9 percent since April of this year, and it too has essentially moved sideways since September 2014. The change in workers’ willingness to voluntarily leave their jobs is a good sign of the state of the U.S. labor market: If workers are quitting at a higher rate, they probably got a new job elsewhere or think the labor market is strong enough that they’ll get a job soon enough. Quitting is a sign of increased bargaining power for workers and often accompanies stronger wage growth. Perhaps we shouldn’t be surprised at the lack of strong wage growth when the quit rate is still below its pre-recession level.

So, in the end, what information can we gleam from the JOLTS data? In short, the U.S. labor market has made real gains from the depths of the Great Recession, but there is a ways to go. Given the stall-out in the hire rate and the quits rate (as well as in the prime-age employment-to-population ratio), the U.S. labor market doesn’t seem to be gaining more steam as 2015 closes out.

The tepid nature of the recovery at this point is a good sign that when the Federal Reserve starts raising interest rates, slow and steady is probably the best way to proceed.

Publication does not imply endorsement of views by the World Economic Forum.

To keep up with the Agenda subscribe to our weekly newsletter.

Author: Nick Bunker is a Policy Analyst with the Washington Center for Equitable Growth.

Image: People wait in line. REUTERS/Shannon Stapleton.

Don't miss any update on this topic

Create a free account and access your personalized content collection with our latest publications and analyses.

Sign up for free

License and Republishing

World Economic Forum articles may be republished in accordance with the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International Public License, and in accordance with our Terms of Use.

The views expressed in this article are those of the author alone and not the World Economic Forum.

Stay up to date:

United States

Related topics:
Economic GrowthJobs and the Future of Work
Share:
The Big Picture
Explore and monitor how United States is affecting economies, industries and global issues
A hand holding a looking glass by a lake
Crowdsource Innovation
Get involved with our crowdsourced digital platform to deliver impact at scale
World Economic Forum logo
Global Agenda

The Agenda Weekly

A weekly update of the most important issues driving the global agenda

Subscribe today

You can unsubscribe at any time using the link in our emails. For more details, review our privacy policy.

A lesson from democracy’s record year: ‘vibes’ mean more to voters than GDP

John Letzing

December 6, 2024

How 'green education' could speed up the net-zero transition

About us

Engage with us

  • Sign in
  • Partner with us
  • Become a member
  • Sign up for our press releases
  • Subscribe to our newsletters
  • Contact us

Quick links

Language editions

Privacy Policy & Terms of Service

Sitemap

© 2024 World Economic Forum