Once an obscure job vacancies survey catches the Fed’s attention
Once an obscure job vacancies survey catches the Fed’s attention – In order to cover a gap in the 1980s economic statistics for the United States, Katharine Abraham, a doctoral student at Harvard University, pieced together an estimate of labor demand, which was simply a best guess as to the number of unfilled positions in the nation.
She drew on a jumble of material, including surveys that some states had performed, a little data from the manufacturing industry, and even a little bit of information from Canada.
She claimed in a recent interview that it was the most accurate information at the time. However, she later transformed that effort into one of the most significant, if still somewhat obscure, sets of labor market statistics outside of the monthly U.S. jobs report itself in the 1990s while serving as the Clinton administration’s commissioner of the Bureau of Labor Statistics.
When compared to unemployment statistics that date back to the 1940s, the Job Openings and Labor Market Turnover Survey (JOLTS), which was first made available to the public in 2002 and contains data going as far back as December 2000, is a recent project that budget cutters even tried to kill the first time Abraham proposed it.
However, it is now established enough that Federal Reserve Chair Jerome Powell uses the JOLTS job vacancy estimate as a benchmark for his opinions on the labor market and, consequently, the potential path of interest rates.
Analysts have paid attention.
Tim Duy, chief U.S. economist at SGH Macro Advisors, wrote in a note that when the survey for October is released on Wednesday, “all eyes will be on the job openings data” and whether an anticipated decline in openings reaffirms the Fed’s hope that the extremely tight hiring conditions seen through much of the COVID-19 pandemic are easing.
“OFF THE LINE”
Once an obscure job vacancies survey catches the Fed’s attention – Estimates of the Fed’s anticipated path for interest rates could be skewed by a significant surprise in either direction.
With roughly two jobs open for every unemployed person, the JOLTS vacancy estimate “has been unusually important in this cycle because it has been so out of line,” Powell said in a news conference following the conclusion of the central bank’s policy meeting on November 1-2. “We continue looking for indicators that a gradual softening is starting to take place. I don’t see any justification for a significant softening just yet.”
In contrast to the 21,000 businesses surveyed by the Labor Department for JOLTS, the monthly unemployment rate is the result of a far larger sample of around 60,000 people each month, yet it nonetheless garners more attention as a proxy for the status of the labor market.
But that figure is sweeping and uninspiring. In order to provide additional complexity regarding the employment market dynamics, researchers have recently explored for supplements, in particular to data like JOLTS.
For instance, a worker who quits their job and a worker who is fired may both appear to be headed for unemployment. However, in a robust economy, a “quitter” is more likely to just move on to another employment, but an increase in layoffs indicates that the economy may be declining.
JOLTS measures both, and former Fed Chair Janet Yellen elevated the quits rate to key status in her examination of the labor market while still vice chair of the American central bank. Estimates of resignations would later, when they peaked during the pandemic, fuel discussion about a “Great Resignation.”
LARGER SCOPE
The JOLTS data has gained enough notoriety that the Biden administration wishes to double the survey’s size and increase funding from roughly $5.5 million to $9.6 million so that estimates can be produced without the current one-month lag, provide more detail by industry and state, and close what are thought to be long-standing gaps.
The current survey’s one-page form, which requests six pieces of information, was created to be simple for businesses to complete and to encourage responses.
However, one problem is that the number of job openings listed by companies doesn’t necessarily reflect how actively they’re looking to fill those positions. As a result, it’s difficult to tell whether executives are actively negotiating salaries or are simply waiting for the right candidate, according to Steven Davis, an economics professor at the University of Chicago Booth School of Business.
“JOLTS was filling a data need when it first appeared, and it has done a decent job of doing so. It’s just lacking, “added Davis. “What’s absent is any information on the effort the company is doing, such as advertising, how quickly interviews are conducted, and whether the criteria are stringent or lax. On that, there is nothing.”
The survey’s current manager, Paul R. Calhoun Jr., who was engaged in its development in the 1990s and may address these and other difficulties in a future extended JOLTS survey.
The pay offered for open positions is one of the significant gaps that could be filled, according to him. This information, when combined with occupational estimates that JOLTS economists are also working to develop, could help show how wages are expected to behave, which is another crucial area for the Fed to address in its efforts to control inflation.
You have a ton of employment openings, Calhoun remarked. “How should I describe them? Are these professions worthwhile or not?”
The beginning of JOLTS is a long way from the expansion of TENUOUS START.
Abraham claimed that although President Bill Clinton’s White House rejected her initial survey plan, it was revived when the unemployment rate dropped to roughly 4% during the technology-driven boom of the mid- to late 1990s and they wanted additional information about what was happening.
“We knew how many people are looking for work but don’t have a job since we had the unemployment rate. There was nothing comparable on the employer side, “She spoke. People “were particularly concerned about labor shortages and the difficulty employers were having in filling jobs,” which is similar to the current scenario.
Even though, JOLTS employees claimed that for the first few years, the program had a shaky hold.
The goal of the team at the time, according to Mark Crankshaw, the senior statistician for JOLTS who also worked on the program’s development, was to create a straightforward survey “to get things off the ground for a few years and maybe survive.”
But “It has been increasing. I’m listening to podcasts right now, and people are talking about JOLTS. I certainly wasn’t expecting it, “said he.
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