Thursday, March 17, 2016

Is This Why Yellen Went Full-Dove: U.S. Hiring Plunges Most Since November 2008

Tyler Durden's picture
While the BLS' JOLTs report usually gets a B-grade in terms of importance due to its one-month delayed look back (we just got the  January report which is one month behind the most recent payrolls number) it serves an important function due to its breakdown of various labor components such a job openings, new hires, separations, quits and terminations, all of which make up Janet Yellen's "labor dashboard." In fact, according to Yellen herself, the JOLTs data is as important, if not more so, than the BLS report.
Which may explain why yesterday the Fed surprised as dovishly as it did.
As a reminder, the key number most look for in the monthly JOLTs report is the number of Job Openings: for January the BLS reported a print of 5,541K, which modestly beat the expected 5,500K consensus number.

However, it wasn't the January number that was the problem, but last month's print, which was then reported at 5,607 and in the latest series was revised to 5,281, a downward revision of 326K. What will be concerning to Yellen - who certainly had these numbers in advance - is that as the chart below shows, this was the biggest downward revision to job openings in series history.
Additionally if one adds the December and November revisions together, the result of -474K is the biggest two-month cut to openings since December 2006.

Another notable disappointment in January was the plunge in the quits level: also known as the "take this job and shove it" indicator, higher "quits" levels (as opposed to discharges or terminations which barely moved in January) suggest workers are confident about job prospects, and vice versa - a drop in quite implies workers are more fearful of the labor market and unwilling to tell their employer they are out. According to the BLS, in January the Quits number dropped by 284K to 2,804K, after breaking out last month. This was the single biggest monthly drop since the financial crisis.

But while the revisions could be ignored, and the quits rate is at best a tertiary indicator, one data series that certainly caught Yellen's attention was the number of January "hires", because as shown in the chart below, with a print of 5,029K in January, this was a whopping 372K drop from the December 5,401K, which also happens to be the biggest single monthly drop in new hiring since November 2008!

In fact, the total number of hires in January 2016 was 23K lower than the 5,052K hired one year ago in January 2015, hardly confirmation of a growing labor market.
This dramatic drop is best seen when showing the two complimentary series of 12 month cumulative changes in payrolls (which has been rolling over ever since February 2015 when it peaked at 3.2 million and is now down to 2.5 million as payrolls have clearly slowed down), and the monthly hiring change. One look at the chart below and one can't help but wonder if the December spike was the labor market top and the rollover in hiring now confirms that the US labor market is set for a slow, or not so slow, contraction in the coming months.

We wonder how much of the above was instrumental in Yellen finally admitting the Fed was at least 50% wrong in just three months the FOMC cut the number of expected 2016 rate hikes from 4 to 2.


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