The Bureau of Labor Statistics released data this week on its latest Job Openings and Labor Turnover Survey (JOLTS), which revealed that job openings fell in December for the second straight month.
As the saying goes, one swallow doesn't make a summer -- and such a small sample doesn't necessarily tell us much about the longer outlook for the labor market. But that doesn't mean the latest data are irrelevant. On the contrary, a comparison of the technical relationship between JOLT's job-openings rate (JOR) and the total number of employees on nonfarm payrolls (TNP) indicates that a divergence between the two measures may well serve as a leading indicator for the labor market as a whole.
Indeed, as the accompanying 10-year chart suggests, whenever the JOR has traced out a reversal pattern (i.e., a low followed by one or more equal or higher lows, and vice-versa) that is at odds with that of the TNP, it has marked a turning point.
Based on the latest readings, it appears such a divergence has come to pass. While the October peak in the JOR only just matched the interim high reported in April, the January nonfarm payrolls tally has exceeded the level seen eight months earlier. So if past history is any guide, those readings would suggest the payroll number is poised to head south -- once again.
Of course, the analysis is based on only 10 years' worth of data, and it spans a time when the economy has been buffeted by an array of unusual and conflicting forces. Moreover, it's entirely possible that the data we see over the next few months (along with any revisions) will negate this call.
But still, it makes intuitive sense that the JOLTS data should be more sensitive to shifting economic winds than the nonfarm payroll data -- because it's far easier for businesses to cancel or post job listings than it is to fire or hire flesh-and-blood employees.
With that in mind, it's worth paying attention to what these two trends seem to be saying -- especially if you've been betting that U.S. consumers are ready to resume their free-spending ways.
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