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The Hill

How trustworthy are our jobs reports?

By May 31, 2024No Comments

(This column originally appeared in The Hill)

According to the Bureau of Labor Statistics, job openings are now at about 8.5 million, significantly down from the 12.2 million openings recorded in March 2022 but still higher than pre-pandemic levels. The takeaway is that although openings are down, businesses are still struggling to find people.

But is this true? Can we even rely on this data?

For years, there have been arguments over the way the voluntary Job Openings and Labor Turnover Survey (known as “JOLTS”) is calculated. According to a Bloomberg report last year, the response rate on the so-called JOLTS survey as to the number of job openings was already falling before the pandemic, which saw participation decline even further. One economist went so far as to call the survey “garbage.”

Multiple academic and government studies have tested the reliability of the methodology behind the monthly number, with mixed conclusions about potential bias and ambiguity. Even the Bureau of Labor Statistics admits that it has only about “90 percent confidence” in its numbers. Right or wrong, the JOLTS numbers have been calculated the same way for at least 20 years.

Unfortunately, the people who track this number get too involved in the minutia of the calculation and miss the big picture. Based on what I’m seeing among my clients and business community, there are at least three reasons JOLTS data seem to make sense.

The first is that, whether it’s 12 million or 12 billion, available job openings are down 30 percent since the pandemic. This dovetails with reality. Back in 2022, thanks to the Great Migration, many employees were switching jobs and others fell out of the workforce. Because of bans, lockdowns and limitations imposed by governments, most of my clients — especially those in the travel, retail and restaurant industries — faced significant disruptions in their operations. Naturally, they advertised or admitted to more open positions than were probably necessary — who wouldn’t? Given the uncertainty of their workforce, it was better to err in favor of caution and be on the lookout for as many people as possible.

But the pandemic is now behind us. Things have settled back down, businesses are mostly back to normal and the need to over-compensate for a fluctuating workforce has substantially diminished. So it makes sense when the data say that businesses have fewer job openings.

JOLTS also makes sense when you consider total job openings compared to total employees. The data indicate that there are now about 8.5 million job openings and approximately 161 million working-age employees in the U.S. Openings are about 5 percent of the total workers in the country. And that’s exactly what I’m seeing in the marketplace: a 5 percent average demand for talent.

For the Bureau of Labor Statistics, “a job is considered open if a specific position exists and there is work available for it, the job can be started within 30 days, and there is active recruiting for the position.” I’m not sure how one defines “active recruiting,” but what company isn’t “actively recruiting” nowadays? Most companies’ leaders would consider 5 percent of their workforce always to be in play.

What about downtimes? Even during the height of the last Great Recession, there were 130 million workers in the U.S. Job openings at that time were understandably lower, about 2.2 million, or almost 2 percent. Of course, some companies, depending on their industry, region and other factors, did better (or worse) than others. But as bad as things were, the typical company with 100 employees was still looking for two workers. That also makes sense.

The third reason why the data make sense is that a “job opening” doesn’t necessarily mean an increase in headcount. Many of my clients who are “actively recruiting” are doing so to replace existing employees, either for performance, retirement or other reasons. Businesses are constantly on the lookout for talent, including when it means replacing existing talent with someone better.

My firm has hundreds of clients. I speak and visit with hundreds more business owners across the country at dozens of industry associations. Here’s what I’m seeing: The JOLTS numbers may decline even more, but as long as they remain in the range of about 5 percent of the total workforce in a growing economy, JOLTS is not “garbage.” It actually makes sense.

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