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Labor Market Churn

One of the hidden aspects of reporting monthly jobs numbers is that they're always reported as a net number: either the economy "adds" or "loses" jobs whenever the BLS reports on the first Friday of every month. But there's a lot more here than meets the eye.

With the onset of the COVID crisis, the labor force has experienced an upheaval that is, to use a worn out word, "unprecedented." We'll probably never see this level of people leaving a job and getting rehired into stronger positions ever again.

This chart tracks the rate of job openings (blue), and "Quits," (black) or voluntary separations. As noted previously, layoffs have slowed to a trickle in the current environment, with initial unemployment claims at the lowest rate since the early 1970s. This is an incredible story.

But, even in "normal" times, there is tremendous churn in the labor force that goes unnoticed. This was pointed out in a recent BLS release, which spans the past decade.

Note the orange line, which shows a relatively minor NET positive change (up until early 2020, when COVID took hold) compared to the movement of job gainers and job losers every quarter. Note the left grid: That's literally millions of people on the move, even in a stable environment where net job creation was on a fairly steady pace once the initial shock of the Great Financial Crisis eased.

However, people still internalize jobs "gained" as just another layer of employees being added to the previous tally. The numbers show the real labor economy doesn't work that way at all, COVID or not.

MAY 02, 2022

"From June 2021 to September 2021, gross job gains from opening and expanding private-sector establishments were 8.8 million, while gross job losses from closing and contracting private-sector establishments were 7.5 million. The difference between the number of gross job gains and the number of gross job losses resulted in a net employment gain of 1.3 million jobs in the private sector during the third quarter of 2021."


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