Wednesday, April 9, 2014
February JOLTS and March Labor Flows
The slopes of all the series continue to be reliably positive, even if not particularly steep.
Flows have been updated through March, and they also continue to show positive trends. Flows between Employment and Not-in-Labor-Force (NLF) are at a level similar to previous economic peaks, believe it or not. Flows between Employment and Unemployment are also back to levels associated with unemployment rates at 6% or less, and with a strong bias for flows back into Employment.
The flows between unemployment and NLF are the set of flows that remain elevated. This is a sign, I believe, of the large pool of long-term unemployed. Trends in the unemployment rate and other indicators of economic strength over the near term will depend on the outcomes of this group of workers. I have suspected that we would see a normalization of this group of workers after the end of EUI. While long-duration unemployment hasn't accelerated downward since the beginning of the year, there does appear to be some downward acceleration in these flows. In fact, over the last two months, as many unemployed workers became employed as left the labor force. That's the first time that has happened since 2008. But, generally, the long term unemployed/NLF group remains a bit of a mystery.
The last graph shows net flows between unemployment and both NLF and Employment, plus the total net outflows from unemployment since 2011. I expected to see 2014 begin with small outflows from U to N and significant outflows from U to E. Both flows would have created downward pressure on the unemployment rate.
Instead, we have seen the opposite. (The pattern in November and December was out of Unemployment, but there wasn't an unusual decline in EUI beneficiaries before the program ended, so this is more likely statistical noise than a trend related to EUI.) Net outflows to Employment have been slightly under trend and Net inflows from NLF to U have been significantly above trend.
Good news over the longer-term is that, while the net rate of workers leaving unemployment has been very steady at about 110,000 workers a month since the beginning of 2011, hidden in this net figure are two positive, but countervailing trends. Net movement both back into the labor force and into employment have been trending up.