You may have heard or read about the most recent JOLTS report in passing. Admittedly, the JOLTS acronym is a bit catchier and easier to remember than many. But what is it and why is it worth watching as investors, particularly now? First, JOLTS stands for the Job Openings and Labor Turnover Survey (JOLTS), administered by the Bureau of Labor Statistics (BLS), producing monthly and annual estimates of job openings, hires, and separations, including quits, layoffs and discharges, for the US. The JOLTS program also produces monthly state estimates for all 50 states and the District of Columbia at the total nonfarm industry level. While retrospective (one month lag), the JOLTS report is unique in reporting monthly job openings, providing greater insight than other, higher profile labor statistics.
The JOLTS report helps economists, business analysts, government officials and investors to better understand the demand/supply dynamics of the US labor market, publishing comprehensive charts and data that can be evaluated to assess its relative tightness or slack. These assessments are used to guide national economic policy, business cycle analyses, economic research and planning, etc. As investors, the JOLTS report has become an important barometer of labor market health, especially during and following the distortions caused by the pandemic. Note in the chart below that the job openings and hires have fluctuated significantly since early 2020, but have settled back toward pre-pandemic levels:
One presentation of JOLTS data that I particularly like is the ratio of job openings to unemployed individuals, reflecting employers’ demand for additional workers as compared to the pool of people actively seeking work. In March of 2022, this ratio peaked at 2:1, suggesting a severe shortage of workers. At that time, employers were “paying up” to attract workers, contributing to inflationary pressures and worries of a “wage-price spiral.” Since that time, the ratio has narrowed back to the pre-pandemic trend of 1.1:1, suggesting a “normalizing” labor market, much to the relief of the Federal Reserve, which began to reduce the Federal Funds rate this past September after two years of rate hikes. As investors, it is prudent to pay attention to both the data and trends revealed in the JOLTS report, given the importance of the labor market to the US economy as well as its significance to the Federal Reserve and its interest rate strategy.
We at Baldwin invite you to contact your investment advisor to discuss how the trends in the JOLTS report could influence your portfolio and asset allocation strategy.
Sources:
https://equalsmoney.com/financial-glossary/jolts
https://www.epi.org/indicators/jolts/
https://www.britannica.com/money/jobless-claims-jolts-report
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Susan Berry-Gorelli, Chief Executive Officer
Susan Berry-Gorelli also is the Director of Research and a Portfolio Manager of Baldwin Investment Management. She has over 30 years of individual and institutional investment and risk management experience in the financial services industry. Susan attended The College of William and Mary and the University of Delaware, earning a B.A. in Economics and History, Summa Cum Laude and Phi Beta Kappa. She is the Board Vice President of the Colonial Theatre in Phoenixville, as well as serves on the finance committees of the French and Pickering Conservation Trust and the Whitemarsh Boat Club.