On the first Friday of every month, the U.S. Bureau of Labor Statistics (BLS) releases its “Employment Situation” report (known colloquially as the “Jobs Report”). This report is a comprehensive snapshot of the labor market across a number of dimensions such as unemployment, labor force participation, and wage rates. On the Tuesday prior to the Jobs Report being released, the BLS also releases a monthly Job Openings and Labor Turnover Survey (JOLTS). This JOLTS report provides data on statistics such as hires, quits, and layoffs.
Monthly jobs data gets plenty of media attention, especially in recent years. But the reality is, it’s tough to know what a 3.6% unemployment rate actually feels like compared to 3.8%. And even harder to know what action (if any) that difference should prompt. With that being said, evaluating how key indicators are trending over time can lead to a more beneficial signal.
One trend that we have been watching closely is the sharp decline in labor churn since a record number of workers left their jobs between 2021 and 2022 (dubbed the “Great Resignation”). While many outlets track the Hire Rate (hires divided by total workers) and the Separation Rate (Quits + layoffs + other separations divided by total workers), we find that Labor churn is a great indicator of how much switching employees are doing at the moment, which in turn is a nice proxy for employee confidence. Labor churn is the piece of employee turnover that is not due to job creation or destruction (we ‘discovered’ this metric from an article published by the board of governors of the federal reserve system – you’re welcome we read these things so you don’t have to.)
Here is a graph of Labor churn and the Unemployment rate over the past 20 years:
Labor churn has been declining for almost four years. Currently, it’s sitting at levels we last saw between 2021 and 2014, coming out of the Great Recession. What’s striking is that it has kept falling even while unemployment has held relatively steady over the past few years. The last time Labor churn was this low, unemployment was between 6-8% – almost twice where it is now.
There’s a lot you could take away from this, but here are two ways we’re thinking about it:
- The labor market doesn’t have a lot of capacity to absorb significant labor displacement (we are curious to watch the impact this year’s reductions to government payrolls will have as transition subsidies end)
- Employees are less confident about making a move, and employers are offering fewer reasons to switch
What does this mean for you? If you’re not hiring, this probably doesn’t change much. But if you are growing, it’s worth revisiting your strategy for reaching candidates who aren’t actively looking. Because for most of today’s workforce, staying put feels safer than leaping, unless the opportunity on the other side is clear and compelling.
Until next time,
Your Spherion South Central WI & Northern IL team