On September 10, the U.S. Bureau of Labor Statistics released the latest data from the Labor Turnover and Job Openings Survey (JOLTS). The survey tracks important labor market indicators, including the number of job openings, hires, layoffs, and quits. While July’s report pointed at continued labor market resilience in the service sector, it flashed some warning signs, particularly in manufacturing and mining.
Declining job openings point to waning employer confidence
After rising rapidly for most of the economic expansion, job openings have started to decline. They have fallen by more than 400,000 since their November 2018 peak, just as they did in 2008 in the months leading up to the Great Recession. The number of new hires has also stopped climbing and has essentially been flat since the start of 2019.
Cooling demand for workers could be the result of trade policy uncertainty, economic jitters abroad, and a variety of industry-specific challenges. For example, oil and gas companies saw their share prices tumble as oil prices fell below $60 a barrel–that is, until the September 14 drone strikes on Saudi oil facilities.
For their part, workers continue to signal confidence in the labor market, however. The number of workers quitting their jobs is high and continues to rise in most service-providing industries–a sign that workers believe that it will be easy for them to find another job. In July, quits reached new record highs in accommodation and food services, as well as in educational services, pulling the overall quit rate back up to 2.4%, where it was last summer.
JOLTS recession indicators flash orange in manufacturing and mining
In mining and manufacturing, however, the picture is decidedly gloomier. Layoffs are ticking upwards, hires are falling, and quits are falling as workers see job opportunities dry up. This is worrying because production industries tend to experience the fastest growth in an expansion, but also experience the earliest and largest declines in a downturn.
The recent weakness in manufacturing and mining could be a temporary blip. Mining employment, in particular, experiences such wild swings in response to commodity prices that it would make for a highly unreliable recession indicator. (In fact, the JOLTS data series for mining is so volatile that we’ve chosen to show smoothed data in the mining chart below.)
But mining and manufacturing both support jobs in other industries, and that is why they are important to watch. Pain in manufacturing today can spill over into service industries tomorrow. Let’s hope the past nine years of growth were part of a sustainable industrial expansion, not just a temporary bounce-back.