WASHINGTON, Nov 29 (Reuters) – As a graduate student at Harvard University in the 1980s, Katharine Abraham tried to fill a hole in U.S. economic data by piecing together an estimate of labor demand work, essentially a better estimate of the number of open jobs in the country.
She drew on a mosaic of data, including surveys that some states had conducted, a bit of information on the manufacturing sector, and even a sprinkling of data on Canada.
It was the best information available at the time, she said in a recent interview. But later, in the 1990s, as commissioner of the Clinton administration’s Bureau of Labor Statistics, she turned this project into one of the most important labor market datasets, though still somewhat obscure, beyond the monthly US jobs report itself.
The Job Openings and Labor Market Turnover Survey (JOLTS), first published in 2002 and with information dating back to December 2000, is young compared to unemployment statistics that date back to the 1940s, and was even scuttled by budget cutters the first time Abraham proposed it.
But he’s got a moment, with a track record now long enough that Federal Reserve Chairman Jerome Powell has made the JOLTS vacancy estimate a touchstone in his view of the labor market and, by therefore, the possible evolution of interest rates.
Analysts have taken note.
When the October survey is released on Wednesday, “all eyes will be on the job openings data” and whether an expected drop in openings reaffirms the Fed’s hope that the extremely tight hiring conditions seen while much of the COVID-19 pandemic is subsiding, Tim Duy, chief U.S. economist at SGH Macro Advisors, wrote in a note.
A big surprise in either direction could swing the Fed’s estimates of the expected path of interest rates.
The JOLTS job vacancies estimate “has been exceptionally large in this cycle because it’s been so out of line,” with about two jobs open for every unemployed person, Powell said at a news conference after the end of the central bank from November 1 to 2. political meeting. “We continue to look for signs that … the beginning of a gradual easing is happening … I don’t see the case for a real easing yet.”
The monthly unemployment rate, the product of a much larger sample of about 60,000 people each month compared to the 21,000 businesses surveyed by the Labor Department for JOLTS, still grabs the most important headlines as a headline figure for the state of the labor market.
But that’s a big, stark statistic. In recent years, researchers have sought supplements, especially to data like JOLTS, to provide more nuance about labor market dynamics.
A worker who quits and another who is made redundant may both appear to be headed for unemployment, for example. But a “resigner” is more likely to simply head for another job, a sign of a strong economy, while rising layoffs are a sign things may be getting weaker.
JOLTS measures both, and former Fed Chair Janet Yellen, while still vice president of the U.S. central bank, raised the quits rate as key in her monitoring of the labor market. Resignation estimates would later fuel the “great resignation” debate when they rose during the pandemic.
The JOLTS data has become large enough that the Biden administration wants to double the size of the survey and increase the budget from about $5.5 million to $9.6 million, so the estimates can be produced. without the current month-long lag, provide more detail by industry and state, and fill in what are considered long-standing gaps.
The current survey has been designed to make it easier for businesses and to encourage responses, with a one-page form that asks for six data elements.
One problem, however, is that the job openings registered by companies do not reflect the intensity with which a company tries to fill its available jobs and, therefore, whether managers are ready to raise salaries or are passively waiting for the good candidate, said Steven Davis, professor of economics at the University of Chicago Booth School of Business.
“When JOLTS came along, it was stepping into a data void that it had filled well. It’s just incomplete,” Davis said. “What’s missing is the effort put in by the employer – like publicity, how quickly you interview…whether the standards are hard or easy. There’s nothing about that.”
An expanded JOLTS survey could directly address this problem and others in the future, said Paul R. Calhoun Jr., who helped develop the survey in the 1990s and is its current director.
Among the substantial holes potentially to be filled, he said, is the salary offered for open jobs – data which, if combined with professional estimates that the JOLTS economists also want to develop, could help show how wages should behave, another key point for the Fed in its efforts to control inflation.
“You have all these job offers,” Calhoun said. “How can I characterize them? Are they good jobs or not?”
The expansion is far from where JOLTS started.
Abraham said that after her original survey proposal was rejected, she was resurrected when the unemployment rate dropped to 4% during the tech boom of the mid-to-late 1990s and President Bill’s White House Clinton wanted more information about what was going on.
“We had the unemployment rate, so we knew how many people were looking for work and didn’t have it. We didn’t have anything like it on the employer side,” she said. Similar to the current situation, “people were very concerned about labor shortages and difficulties for employers to fill jobs.”
Even then, JOLTS staffers said the program had a tenuous hold for the first few years.
The staff’s priority at the time was to build a simple investigation “to get this off the ground for a few years and hopefully survive because that was certainly, from my perspective, not a guarantee,” Mark said. Crankshaw, the chief statistician of JOLTS who also helped build the program.
But “it’s going up. Now…I’m listening to podcasts and people are starting to talk about JOLTS…I didn’t expect that at all,” he said.
Reporting by Howard Schneider; Editing by Dan Burns and Paul Simao
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