The employment situation in the U.S. continues to be negative, with record levels of people filing initial and continuing jobless claims and an unemployment rate at the highest level since the 1930s (though close to 80% of claims are temporarily unemployed). In a prior post, we mentioned the importance of watching the labor participation rate as this will help determine if workers think the job prospects are strong enough to warrant continuing to look for positions. In April, the participation rate dropped to 60.2, which is the lowest level since 1973.
There is another employment-based data series that helps determine whether companies think they will need to make permanent versus temporary changes to their workforce numbers. The monthly Job Openings and Labor Turnover (JOLTS) report for March was released last week. This report measures the number of job openings, hires, separations, and voluntary resignations each month. In March specifically, the number of layoffs increased over 500% to 11.4 million, which are both record highs.
While this information is disappointing, it was not surprising and follows the trend of other labor market reports. What was surprising is that the number of job openings only declined by 11.5% to 6.2 million. While this was the lowest level since May 2017, it could be a sign that, at least for now, companies expect some of these layoffs to be temporary. If companies anticipate continued rounds of payroll reductions, they will likely start removing their openings at a rapid pace. The number of job openings declined by 43% from peak to trough in the 2000 recession and by 54% from 2007-2009.
If job openings continue to decline, this would be a concern as it could suggest that companies anticipate a more permanent reduction in the headcount.
Vice President, Research and Strategy
Boyd Watterson Asset Management, LLC
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