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New Tools for Labor Market Analysis: JOLTS

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New Tools for Labor Market Analysis: JOLTS JobJob Openings Openings and Labor Turnoverand Labor Turnover New tools for labor market analysis: JOLTS As a single, direct source for data on job openings, hires, and separations, the Job Openings and Labor Turnover Survey (JOLTS) should be a useful indicator of the demand for labor in the U.S. labor market and of other economic conditions Kelly A. Clark nalysis of the U.S. labor market is a diffi- collects data from businesses and produces em- and cult and challenging effort. A number of ployment estimates. Another survey, the Current Rosemary Hyson Aexisting economic indicators, including Population Survey (CPS), conducted by the Cen- the unemployment rate, payroll employment, and sus Bureau, collects employment status data from others, serve as useful measures of labor market households for BLS to determine the unemploy- activity, general economic conditions, and labor ment rate, which measures excess labor supply. supply. However, to facilitate a more comprehen- The BLS Job Openings and Labor Turnover Sur- sive analysis of the U.S. labor market and to show vey, completes the labor market picture by col- how changes in labor supply and demand affect lecting monthly data from businesses to measure the overall economy, the Bureau of Labor Statis- unmet labor demand and job turnover. tics will introduce a new data series measuring This new program involves the collection, pro- labor demand and turnover: the Job Openings cessing, and dissemination of job openings and and Labor Turnover Survey (JOLTS).1 labor turnover data from a sample of 16,000 busi- The availability of unfilled jobs—the number ness establishments. The universe frame for the of job openings or the openings rate—is an im- JOLTS sample consists of approximately 8 million portant measure of the tightness of labor mar- establishments compiled as part of the operations kets. JOLTS calculates the number of job openings of the BLS Covered Employment and Wages, or from a nationwide sample of establishments and ES-202, program. This frame includes all employ- computes a job openings, or vacancy, rate. This ers subject to State Unemployment Insurance (UI) new survey also collects data on separations by laws and Federal agencies subject to the Unem- type and hires, providing a single source for ployment Compensation for Federal Employees these data that will enhance empirical analyses (UCFE) program. The sampling frame is stratified of the economy and the labor market. This article by ownership (public or private), geographic re- briefly describes the survey and then discusses gion, major industry division, and size class. The how JOLTS data will help enrich analysis of the JOLTS sample is representative of private nonfarm Kelly A. Clark is an establishments as well as Federal, State, and lo- economist and U.S. labor market and the economy as a whole. Rosemary Hyson is a cal government entities in the 50 States and the research economist in The survey District of Columbia. The sample is rotated so the Office of that most establishments participate in the sur- Employment and Unemployment BLS collects and analyzes monthly data on many vey for 18 consecutive months. Total employment Statistics, Bureau of aspects of the U.S. labor market. One BLS survey, estimates from JOLTS are controlled to the current Labor Statistics. the Current Employment Statistics (CES) survey, month CES employment estimates, and this is used 32 Monthly Labor Review December 2001 to adjust the levels for all other JOLTS data elements. the curve reflects the negative relationship between vacan- The data elements collected monthly from each establish- cies and unemployment.3 Changes in the business cycle gen- ment include employment for the pay period that includes the erate movement along the curve, while reallocation of labor 12th of the month; the number of job openings on the last and capital between sectors moves the curve further away business day of the month; and hires, quits, layoffs and dis- from or closer to the origin. These forces are not independent charges, and other separations for the entire month. To en- of one another, and changes in labor force composition and courage consistent and accurate reporting, respondents are job search behavior also affect where the Beveridge curve is given detailed definitions for each data element. For example, relative to the origin. Economic researchers can use the JOLTS the definition of a job opening requires that a specific posi- data to test and refine models that show how such factors tion exists, the job could start within 30 days, and that the affect labor market dynamics and the distribution of workers employer is actively recruiting from outside the establishment across sectors. to fill the position. Hires are all additions to the payroll during Another topic of importance to economists is the relation- the month, and a layoff should be counted if it lasts or is ship between changes in wages and changes in employment. expected to last more than 7 days. Primarily, economists have only been able to examine this in BLS anticipates releasing monthly estimates of job openings, the context of the Phillips curve, a relationship linking devia- hires, and separation rates and levels beginning in early 2002. tions from the natural rate of unemployment—or excess la- The JOLTS data series will be considered a developmental series bor supply—to wage changes. The JOLTS series on job open- for the first 2 years of publication. Estimates will be released for ings will finally provide a consistent series on excess labor the Nation as a whole and for four geographic regions. The demand that will extend economists’ ability to study the rela- national estimates for the private sector will be divided into nine tionship between wage and employment changes. industry divisions based on the Standard Industrial Classifica- To study the Beveridge curve and its implications, research- tion (SIC) system. Additional estimates will be published for the ers have had to use a variety of proxies for the vacancy rate. Federal Government and for State and local governments com- Much work in this area has been done using a vacancy series bined. JOLTS estimates will be converted to the North American constructed from employment, as measured by BLS, and the Con- Industry Classification System (NAICS) in 2003.2 ference Board’s Help-Wanted Advertising Index. This proxy has served as an imperfect measure, because the index does not Anticipated uses of the data cover the entire country, job openings are not directly counted, there are no precise definitions or adjustments for what consti- The JOLTS data series on job openings, hires, and separations tutes actual job openings, and there are other factors indepen- will assist policymakers and researchers in addressing some dent of labor demand that can increase the volume of want ads. fundamental issues concerning labor demand and movements JOLTS will provide a directly measured vacancy series that can in the labor market. The JOLTS data will provide a basis for be used for this type of analysis. improved understanding of the factors driving fluctuations in The Bureau of Labor Statistics has conducted various sur- unemployment and the overall economy, determining appro- veys to measure job openings in the past, but these were priate approaches for reducing unemployment, and studying either short lived or were limited to the manufacturing indus- how workers flow in and out of establishments, are matched try. JOLTS was developed to consistently record monthly job with jobs, and are distributed across sectors. openings for all nonagricultural industries, including both Of particular interest to researchers will be the study of the public and private businesses, and is representative of the relationship of vacancies and unemployment. The JOLTS job national economy. openings rate is expected to have a negative relationship to Researchers have used the available proxies to study the unemployment rate. For example, as the economy expands, movements in the unemployment-vacancy relationship over the unemployment rate generally falls, reflecting a decreased the past few decades because a consistent set of vacancy pool of excess workers. Simultaneously, the job openings rate data has not been available. Generally, this work has docu- is expected to increase as businesses seek workers to fill new mented upward movement along the Beveridge curve during and existing jobs. Alternatively, in a weak economy, the unem- the 1960s, and a combination of movement along the curve ployment rate typically increases as businesses shed workers and outward shifts in the relationship for various periods in response to weak demand, and the job openings rate is during the 1970s and 1980s.4 Recent work by Hoyt Bleakley expected to fall as employers cut back their hiring plans. and Jeffrey C. Fuhrer documents an inward shift of the curve The empirical relationship linking vacancies with unem- in the early 1990s.5 ployment and the overall economy is called the Beveridge curve. A stylized version of the Beveridge curve is shown in Uses of JOLTS data in economic analysis. The analysis of exhibit 1. First described by William Beveridge in the 1940s, the co-movement of the unemployment and vacancy rates Monthly Labor Review December 2001 33 Job Openings and Labor Turnover can provide more information about business cycles and the type of unemployment that is prevalent in the economy. When Exhibit 1. Movement along the Beveridge curve the structure of the economy is fixed, the position on the Beveridge curve reflects whether an economy is expanding or Vacancy rate contracting, as shown in exhibit 1. In times of economic ex- pansion, the unemployment-vacancy combination will be high on the curve (low unemployment rate, high vacancy rate), and in contractions it will be low (high unemployment rate, low vacancy rate). The changes in unemployment generated by this movement will mostly reflect cyclical fluctuations in labor Expansion demand.
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