Meet the Author

Murat Tasci |

Research Economist

Murat Tasci

Murat Tasci is a research economist in the Research Department of the Federal Reserve Bank of Cleveland. He is primarily interested in macroeconomics and labor economics. His current work focuses on business cycles and labor markets, labor market policies, and search frictions.

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Meet the Author

Michael Shenk |

Research Assistant

Michael Shenk

Michael Shenk was formerly a research assistant in the Research Department of the Federal Reserve Bank of Cleveland. His work focused on international topics and housing-market indicators.

10.03.07

Economic Trends

Labor Turnover

Murat Tasci and Michael Shenk

The hiring and firing behavior of establishments across the nation is tracked by the Bureau of Labor Statistics in its Job Openings and Labor Turnover (JOLTS) data. One important statistic from JOLTS is the net hires rate—the difference between the hires rate and the separations rate. A positive net hires rate indicates that aggregate employment across establishments has increased. This rate has not been negative since June 2003, which means that between June 2003 and July 2007, establishments across the country did not experience a net employment decline in the aggregate. Our earlier note on this topic in January 2007 reported a net employment decline in September 2005, but since then, the BLS has made several revisions to the data. The revised data indicate a strong 0.2 percent net hires rate for the second quarter of 2007 (a hires rate of 3.5 percent minus the separations rate of 3.3 percent). The job openings rate—the number of job openings divided by the sum of job openings and employment expressed in percentages—has also been hovering around 3 percent, one of the highest levels since the last recession.

The average hires rate since December 2000 has been 3.42 percent a month, which implies that more than 4.2 million employees were hired on average each month at the establishment level. At the same time, about 4.1 million jobs a month were lost at the same establishments, due to layoffs, quits, and other forms of separation. So the net result during this period was 104,000 net hires each month on average. Labor demand has also been steady, with more than three million jobs being opened on average each month since December 2000. Most of the net jobs created were in two service industries, professional and business services and education and health services, and these partly offset job losses in manufacturing.

Average Job Openings and Labor Turnover by Industry

 
Since December 2000, thousands

Job openings
Hires
Total separations
>
Total private
3075
4209
4105
Mininga
9
20
19
Construction
124
381
387
Manufacturing
261
347
402
Trade, transportation, and public utilities
574
975
968
Informationa
91
72
79
Finance, insurance, and real estatea
208
188
183
Professional and business services
605
781
713
Education and health services
621
457
402

a. Not seasonally adjusted.
Source: U.S. Department of Labor, Bureau of Labor Statistics.

It is often hard to understand the greater picture of labor turnover by looking at monthly levels of hirings, separations, and job openings in isolation of the broader trends. If we look at trends in hiring and job openings, we see that both have been increasing gradually since early 2003, a few quarters after the end of last recession. Even though hiring has leveled off recently, employers’ demand for workers, as indicated by job openings, has been still trending upwards.

In principle, aggregate trends might disguise differences across sectors. For instance, labor turnover in the aggregate economy looks very different from labor turnover in the construction sector, which is expected to be hardest hit by recent turmoil in the housing market. The construction sector does not seem to have large swings in trend like the aggregate economy. Even though the job openings trend headed downward slightly, dipping around early 2003, the hiring trend stayed very much the same and even increased a bit during and after the recent recession. Unlike in the aggregate economy, hiring in construction has started to trend downward since May 2005.