U.S. October Job Openings and Labor Turnover Report (Text)

Following is the text of the October job openings and labor turnover rates.

Job Openings and Labor Turnover - October 2010

There were 3.4 million job openings on the last business day of October, the U.S. Bureau of Labor Statistics reported today. The job openings rate increased over the month to 2.5 percent. The hires rate remained at 3.2 percent in October, while the separations rate was essentially unchanged at 3.1 percent. This release includes estimates of the number and rate of job openings, hires, and separations for the total nonfarm sector by industry and geographic region.

Job Openings The number of job openings in October was 3.4 million, which was up from 3.0 million in September. Since the most recent series trough in July 2009, the number of job openings has risen by 1.0 million or 44 percent. (See table 1.) This trough immediately followed the end of the recession in June 2009 (as designated by the National Bureau of Economic Research). Even with the gains since July 2009, the number of job openings in October remained 1.0 million below the 4.4 million openings when the recession began in December 2007.

The number of job openings in October (not seasonally adjusted) increased from 12 months earlier for total nonfarm and total private. The level was little changed over the year for government overall but decreased for federal government. Over the year, the job openings level increased in seven industries and decreased in two industries. The job openings level was up over the year in 3 of the 4 regions: the Northeast, South, and West.

Hires In October, the hires rate remained at 3.2 percent for total nonfarm and the rate was essentially unchanged for all industries and regions. There were 4.2 million hires during the month, 9 percent higher than the most recent series trough in June 2009. (See table 2.) This trough coincided with the official end of the recession. Despite the gains since June 2009, the number of hires in October remained below the 5.0 million hires when the recession began in December 2007. Since their respective troughs, the hires level has risen at a slower pace than the job openings level.

Over the 12 months ending in October, the hires rate (not seasonally adjusted) was little changed for total nonfarm and total private but fell slightly for government. The hires rate increased over the past 12 months in retail trade, decreased in real estate and rental and leasing, and was essentially unchanged in the remaining industries.

Separations Total separations includes quits (voluntary separations), layoffs and discharges (involuntary separations), and other separations (including retirements). The total separations, or turnover, rate in October was little changed for total nonfarm and total private, but the rate decreased for government. Over the 12 months ending in October, the total separations rate (not seasonally adjusted) was little changed for total nonfarm, total private, and government.

The quits rate can serve as a measure of workers’ willingness or ability to change jobs. In October, the quits rate was little changed for total nonfarm (1.5 percent), total private (1.7 percent), and government (0.5 percent) and in every industry and region. (See table 4.) The number of quits in October (2.0 million) is somewhat higher than the series trough in September 2009 (1.7 million), but it is still well below the series peak in November 2006 (3.2 million).

Over the 12 months ending in October, the quits rate (not seasonally adjusted) increased for total nonfarm; total private; professional and business services; and arts, entertainment, and recreation as well as in the Midwest and South regions. (See table 8.)

The layoffs and discharges component of total separations is seasonally adjusted at the total nonfarm, total private, and government levels. The layoffs and discharges level was essentially unchanged in October for total nonfarm and total private but fell for government. The number of layoffs and discharges for total nonfarm peaked at 2.6 million in January 2009, falling to 1.7 million in October 2010. In government, the number of layoffs and discharges in October (108,000) was lower than when the recession began in December 2007 (117,000).

The layoffs and discharges level (not seasonally adjusted) declined over the 12 months ending in October for total nonfarm and total private, but the level increased in federal government. The layoffs and discharges level declined over the year in many industries and in the South and Midwest regions. (See table 9.)

The other separations series is not seasonally adjusted. In October, there were 302,000 other separations for total nonfarm, 257,000 for total private, and 44,000 for government. Compared to October 2009, the number of other separations was little changed for total nonfarm and total private. The number of other separations decreased over the year for federal government. (See table 10.)

Relative Contributions to Separations The total separations level is influenced by the relative contribution of its three components--quits, layoffs and discharges, and other separations. The percentage of total separations at the total nonfarm level attributable to the individual components has varied over time, but for the majority of the months since the series began in December 2000, the proportion of quits has exceeded the proportion of layoffs and discharges. Other separations is historically a very small portion of total separations; it has rarely been above 10 percent of the total.

Since February 2010, the proportions of quits and of layoffs and discharges at the total nonfarm level have been close. In October 2010, the proportion of quits for total nonfarm was 49 percent and the proportion of layoffs and discharges was 42 percent. For total private, the proportions were 50 percent quits and 43 percent layoffs and discharges. For government, the proportions were 39 percent quits and 39 percent layoffs and discharges. The proportion of layoffs and discharges in government had been higher than usual in parts of 2009 and 2010 due to layoffs of temporary Census 2010 workers. This proportion decreased in October as most temporary Census 2010 workers had already been discharged.

Net Change in Employment Over the 12 months ending in October, hires (not seasonally adjusted) totaled nearly 50.8 million and separations (not seasonally adjusted) totaled 50.0 million, yielding a net employment gain of 0.7 million. These figures include workers who may have been hired and separated more than once during the year.

____________ The Job Openings and Labor Turnover Survey results for November 2010 are scheduled to be released on Tuesday, January 11, 2011 at 10:00 a.m. (EST).

Technical Note

The data for the Job Openings and Labor Turnover Survey (JOLTS) are collected and compiled monthly from a sample of business establishments by the Bureau of Labor Statistics (BLS).

Collection

In a monthly survey of business establishments, data are collected for total employment, job openings, hires, quits, layoffs and discharges, and other separations. Data collection methods include computer-assisted telephone interviewing, touchtone data entry, web, fax, e-mail, and mail.

Coverage

The JOLTS program covers all private nonfarm establishments such as factories, offices, and stores, as well as federal, state, and local government entities in the 50 states and the District of Columbia.

Concepts

Industry classification. The industry classifications in this release are in accordance with the 2007 version of the North American Industry Classification System (NAICS). In order to ensure the highest possible quality of data, State Workforce Agencies verify with employers and update, if necessary, the industry code, location, and ownership classification of all establishments on a 3-year cycle. Changes in establishment characteristics resulting from the verification process are always introduced into the JOLTS sampling frame with the data reported for the first month of the year.

Employment. Employment includes persons on the payroll who worked or received pay for the pay period that includes the 12th day of the reference month. Full-time, part-time, permanent, short-term, seasonal, salaried, and hourly employees are included, as are employees on paid vacations or other paid leave. Proprietors or partners of unincorporated businesses, unpaid family workers, or persons on leave without pay or on strike for the entire pay period, are not counted as employed. Employees of temporary help agencies, employee leasing companies, outside contractors, and consultants are counted by their employer of record, not by the establishment where they are working.

Job openings. Establishments submit job openings information for the last business day of the reference month. A job opening requires that: 1) a specific position exists and there is work available for that position, 2) work could start within 30 days regardless of whether a suitable candidate is found, and 3) the employer is actively recruiting from outside the establishment to fill the position. Included are full-time, part-time, permanent, short-term, and seasonal openings. Active recruiting means that the establishment is taking steps to fill a position by advertising in newspapers or on the Internet, posting help-wanted signs, accepting applications, or using other similar methods.

Jobs to be filled only by internal transfers, promotions, demotions, or recall from layoffs are excluded. Also excluded are jobs with start dates more than 30 days in the future, jobs for which employees have been hired but have not yet reported for work, and jobs to be filled by employees of temporary help agencies, employee leasing companies, outside contractors, or consultants. The job openings rate is computed by dividing the number of job openings by the sum of employment and job openings and multiplying that quotient by 100.

Hires. Hires are the total number of additions to the payroll occurring at any time during the reference month, including both new and rehired employees, full-time and part-time, permanent, short-term and seasonal employees, employees recalled to the location after a layoff lasting more than 7 days, on-call or intermittent employees who returned to work after having been formally separated, and transfers from other locations. The hires count does not include transfers or promotions within the reporting site, employees returning from strike, employees of temporary help agencies or employee leasing companies, outside contractors, or consultants. The hires rate is computed by dividing the number of hires by employment and multiplying that quotient by 100.

Separations. Separations are the total number of terminations of employment occurring at any time during the reference month, and are reported by type of separation--quits, layoffs and discharges, and other separations. Quits are voluntary separations by employees (except for retirements, which are reported as other separations). Layoffs and discharges are involuntary separations initiated by the employer and include layoffs with no intent to rehire; formal layoffs lasting or expected to last more than 7 days; discharges resulting from mergers, downsizing, or closings; firings or other discharges for cause; terminations of permanent or short-term employees; and terminations of seasonal employees. Other separations include retirements, transfers to other locations, deaths, and separations due to disability. Separations do not include transfers within the same location or employees on strike.

The separations rate is computed by dividing the number of separations by employment and multiplying that quotient by 100. The quits, layoffs and discharges, and other separations rates are computed similarly, dividing the number by employment and multiplying by 100.

Annual estimates. Annual estimates of rates and levels of hires, quits, layoffs and discharges, other separations, and total separations are released with the January news release each year.

The JOLTS annual level estimates for hires, quits, layoffs and discharges, other separations, and total separations are the sum of the 12 published monthly levels. The annual rate estimates are computed by dividing the annual level by the Current Employment Statistics (CES) annual average employment level, and multiplying that quotient by 100. This figure will be approximately equal to the sum of the 12 monthly rates. Note that both the JOLTS and CES annual levels are rounded to the nearest thousand before the annual estimates are calculated. Consistent with BLS practices, annual estimates are published only for not seasonally adjusted data.

Annual estimates are not calculated for job openings because job openings are a stock, or point-in-time, measurement for the last business day of each month. Only jobs still open on the last day of the month are counted. For the same reason job openings cannot be cumulated throughout each month, annual figures for job openings cannot be created by summing the monthly estimates. Hires and separations are flow measures and are cumulated over the month with a total reported for the month. Therefore, the annual figures can be created by summing the monthly estimates.

Special collection procedures

An implied measure of employment change can be derived from the JOLTS data by subtracting separations from hires for a given month. Aggregating these monthly changes historically produced employment levels that overstated employment change as measured by CES at the total nonfarm level. Research into this problem showed that a significant amount of the divergence between the CES employment levels and the derived JOLTS employment levels was traceable to the Employment Services industry and to the State Government Education industry. In the former industry, businesses have a difficult time reporting hires and separations of temporary help workers. In the latter industry, employers have difficulty reporting hires and separations of student workers. BLS now devotes additional resources to the collection, editing, and review of data for these industries. BLS analysts more closely examine reported data that do not provide a consistent picture over time, and re-contact the respondents as necessary. Analysts work with the respondents to adjust their reporting practices as possible. Units that cannot be reconciled but are clearly incorrect on a consistent basis are not used, they are replaced by imputed values using standard techniques.

Sample and estimation methodology

The JOLTS survey design is a random sample of 16,000 nonfarm business establishments, including factories, offices, and stores, as well as federal, state, and local governments in the 50 states and the District of Columbia. The establishments are drawn from a universe of over 9.1 million establishments compiled as part of the operations of the Quarterly Census of Employment and Wages (QCEW) program. This program includes all employers subject to state Unemployment Insurance (UI) laws and federal agencies subject to Unemployment Compensation for Federal Employees (UCFE).

The sampling frame is stratified by ownership, region, industry sector, and size class. The JOLTS sample is constructed from individual panels of sample units drawn on an annual basis. The full annual sample consists of one certainty panel composed of only large units selected with virtual certainty based on their size and 24 non-certainty panels. Each month a new non-certainty panel is rolled into collection, and the oldest non-certainty panel is rolled out. This means that at any given time the JOLTS sample is constructed from panels from three different annual sampling frames. The entire sample of old plus new panels is post-stratified and re-weighted annually to represent the most recent sampling frame. Additionally, the out-of-business establishments are removed from the old panels. The annual sample is supplemented with a quarterly sample of birth establishments (i.e., new establishments) to better reflect the impact of younger establishments in the JOLTS sample.

JOLTS total employment estimates are benchmarked monthly to the employment estimates of the Current Employment Statistics (CES) survey. A ratio of CES to JOLTS employment is used to adjust the levels for all other JOLTS data elements.

JOLTS business birth/death model

As with any sample survey, the JOLTS sample can only be as current as its sampling frame. The time lag from the birth of an establishment until its appearance on the sampling frame is approximately one year. In addition, many of these new units may fail within the first year. Since these universe units cannot be reflected on the sampling frame immediately, the JOLTS sample cannot capture job openings, hires, and separations from these units during their early existence. BLS has developed a model to estimate birth/death activity for current months by examining the birth/death activity from previous years on the QCEW and projecting forward to the present using an econometric technique known as X-12 ARIMA modeling. The birth/death model also uses historical JOLTS data to estimate the amount of “churn” (hires and separations) that exists in establishments of various sizes. The model then combines the estimated churn with the projected employment change to estimate the number of hires and separations taking place in these units that cannot be measured through sampling.

The model-based estimate of total separations is distributed to the three components--quits; layoffs and discharges; and other separations--in proportion to their contribution to the sample- based estimate of total separations. Additionally, job openings for the modeled units are estimated by computing the ratio of openings to hires in the collected data and applying that ratio to the modeled hires. The estimates of job openings, hires, and separations produced by the birth/death model are then added to the sample-based estimates produced from the survey to arrive at the estimates for openings, hires, and separations.

Seasonal adjustment

BLS seasonally adjusts several JOLTS series using the X-12 ARIMA seasonal adjustment program. Seasonal adjustment is the process of estimating and removing periodic fluctuations caused by events such as weather, holidays, and the beginning and ending of the school year. Seasonal adjustment makes it easier to observe fundamental changes in the level of the series, particularly those associated with general economic expansions and contractions. A concurrent seasonal adjustment methodology is used in which new seasonal adjustment factors are calculated each month, using all relevant data, up to and including the data for the current month.

JOLTS uses moving averages as seasonal filters in seasonal adjustment. JOLTS seasonal adjustment includes both additive and multiplicative seasonal adjustment models and REGARIMA (regression with autocorrelated errors) modeling to improve the seasonal adjustment factors at the beginning and end of the series and to detect and adjust for outliers in the series.

Alignment procedure

JOLTS hires minus separations should be comparable to the CES net employment change. However, definitional differences as well as sampling and non-sampling errors between the two surveys historically caused JOLTS to diverge from CES over time. To limit the divergence, and improve the quality of the JOLTS hires and separations series, BLS implemented the Monthly Alignment Method. The Monthly Alignment Method applies the CES employment trends to the seasonally adjusted JOLTS implied employment trend (hires minus separations) forcing them to be approximately the same, while preserving the seasonality of the JOLTS data. First, the two series are seasonally adjusted and the difference between the JOLTS implied employment trend and the CES net employment change is calculated. Next, the JOLTS implied employment trend is adjusted to equal the CES net employment change through a proportional adjustment. This proportional adjustment procedure adjusts the two components (hires, separations) proportionally to their contribution to the total churn (hires plus separations). For example, if hires are 40 percent of the churn for a given month, they will receive 40 percent of the needed adjustment and separations will receive 60 percent of the needed adjustment. The adjusted hires and separations are converted back to not seasonally adjusted data by reversing the application of the original seasonal factors. After the Monthly Alignment Method has been used to adjust the level estimates, rate estimates are computed from the adjusted levels. The monthly alignment procedure assures a close match of the JOLTS implied employment trend with the CES trend. The CES series is considered a highly accurate measure of net employment change owing to its very large sample size and annual benchmarking to universe counts of employment from the QCEW program.

Using JOLTS data

The JOLTS data series on job openings, hires, and separations are relatively new. The full sample is divided into panels, with one panel enrolled each month. A full complement of panels for the original data series based on the 1987 Standard Industrial Classification (SIC) system was not completely enrolled in the survey until January 2002. The supplemental panels of establishments needed to create NAICS estimates were not completely enrolled until May 2003. The data collected up until those points are from less than a full sample. Therefore, estimates from earlier months should be used with caution, as fewer sampled units were reporting data at that time.

In March 2002, BLS procedures for collecting hires and separations data were revised to address possible underreporting. As a result, JOLTS hires and separations estimates for months prior to March 2002 may not be comparable to estimates for March 2002 and later.

The federal government reorganization that involved transferring approximately 180,000 employees to the new Department of Homeland Security is not reflected in the JOLTS hires and separations estimates for the federal government. The Office of Personnel Management’s record shows these transfers were completed in March 2003. The inclusion of transfers in the JOLTS definitions of hires and separations is intended to cover ongoing movements of workers between establishments. The Department of Homeland Security reorganization was a massive one-time event, and the inclusion of these intergovernmental transfers would distort the federal government time series.

Reliability of the estimates

JOLTS estimates are subject to both sampling and nonsampling error. When a sample rather than the entire population is surveyed, there is a chance that the sample estimates may differ from the “true” population values they represent. The exact difference, or sampling error, varies depending on the particular sample selected, and this variability is measured by the standard error of the estimate. BLS analysis is generally conducted at the 90-percent level of confidence. That means that there is a 90-percent chance, or level of confidence, that an estimate based on a sample will differ by no more than 1.6 standard errors from the “true” population value because of sampling error. Estimates of sampling errors are available upon request.

The JOLTS estimates also are affected by nonsampling error. Nonsampling error can occur for many reasons, including the failure to include a segment of the population, the inability to obtain data from all units in the sample, the inability or unwillingness of respondents to provide data on a timely basis, mistakes made by respondents, errors made in the collection or processing of the data, and errors from the employment benchmark data used in estimation.

To contact the reporter on this story: Kristy Scheuble in Washington at kmckeaney@bloomberg.net

To contact the editor responsible for this story: Marco Babic at mbabic@bloomberg.net

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