Labor Market Churn

July 28, 2011

The Bureau of Labor Statistics (BLS) release of the U.S. unemployment rate each month generates a significant amount of attention; however, this headline number provides only a static view on the health of the labor market. Since reaching a high of 10.1% in October 2009, the unemployment rate is currently 9.2% through June 2011 and remains at elevated levels following the “Great Recession” of 2007-2009.

An alternate method to gauge the health of the labor market involves analyzing the total number of job openings, hires, and separations each month. The BLS refers to this as the Job Openings and Labor Turnover Survey (JOLTS). The JOLTS survey shows the level of activity taking place in the labor market, generally referred to as “churn”. Labor market churn, the movement of workers from one job to another, shows how fluid the job market is with higher levels generally corresponding to a healthier job market. Hires and separations have remained below pre-recession levels and have shown little improvement during the past two years.

It has been estimated that approximately 125K jobs need to be created every month just to keep up with the pace of population growth. In order to bring unemployment down, a significantly higher amount of job growth per month will be needed for a sustained period of time. In May 2011, the number of hires was roughly 12% higher than the low in experienced in October 2009, but remains well below pre-recession levels.