Job Flows in the Recession and Recovery

The monthly release of unemployment rate and nonfarm payroll jobs estimates is among the most widely followed set of economic indicators in the United States. News accounts often portray net payroll job growth as “hiring” or net job loss as “layoffs.” Neither characterization is correct. In any given month the number of people who were hired or who separated from a job is much larger than the net job change.

Patterns of Hires and Separations

During and shortly after the 2008 to 2009 recession, the number of nonfarm jobs in Maine declined by nearly 25,000 to an average of 593,000 in 2010. Though many individuals lost their jobs, the large net job losses occurred despite the fact that the number of job separations declined by more than 9,000 per quarter. Net job losses were primarily due to an even larger decline in hires than separations.

Primary Job Hires and Separations in Maine 

 

In the jobs recovery from 2010 through 2015, the number of nonfarm jobs in Maine increased by nearly 18,000 to an average of 610,600. Though many individuals gained jobs, the net job gains occurred despite the fact that the number of job separations increased by nearly 5,000 per quarter. Net job gains were due to an even larger increase in hires than separations.

 

The pro-cyclical pattern of the number of hires declining during an economic downturn and rising during an expansionary period seems logical. The counter-cyclical pattern of job separations declining in a downturn and rising in an expansion seems less intuitive. Why does this occur?

 

Hires and Separations by Source

Hires of previously jobless people add to the job count, of course, and those hires did decrease during the recession. Similarly, separations to joblessness subtract from the job count, and those did increase during the recession. The more pronounced cyclical pattern, though, was the change in the number of people moving from one employer to another. Job-to-job movements, which have no substantial impact on the employment base, declined sharply during the recession and increased steadily as the recovery progressed.

Primary Job Hires and Separations in Maine by Source
 

 

 

The decline in job-to-job movement during the downturn reflects relatively fewer job openings and opportunities to change jobs. It also reflects the choice by many individuals to remain with their current employer, where they feel secure and are getting paid, rather than to move to another employer due to perceived risk of losing seniority or being the new person in a company that may need to let some staff go. Likewise, the rise in job-to-job movements during the recovery reflects rising numbers of jobs openings and diminishing perceptions of risk.

During the recovery, separations to joblessness gradually trended lower and hires from joblessness were relatively unchanged. Job-to-job movements steadily increased, reaching pre-recession levels in 2014.

 

 

Hires and Separations by Age Group

In 2014, there was an average of 28,000 primary job hires from persistent joblessness, outpacing 26,850 separations to persistent joblessness, resulting in a net job gain. (Hires from joblessness are those in which an individual was not employed on the first day of the current quarter or in the previous quarter. Separations to joblessness are those that were employed on the first day of a quarter who were not employed on the last day of a quarter or the succeeding quarter.)

 

More than one-third of hires and one-quarter of job separations were among young people under 25 years of age, reflecting their entry to the labor force, the seasonal nature of work for many students, and higher rates of job change common among young people. The amount of job churn generally declines with age. There were more hires than separations among those under 45 and more separations than hires among older workers due to retirement and other reasons for leaving the workforce.

Primary Job Hires and Separations in Maine by Age Group in 2014

 

Patterns of job separations and hires vary over time, depending on the stage of the business cycle, whether they involve changing jobs or moving to or from joblessness, and by age. In the years ahead the number of job separations of older workers is likely to increase due to the large numbers of baby boomers entering retirement.

Notes

1. Job flow data on hires and separations comes from Longitudinal Employer-Household Dynamics. It includes private-sector and state- and local-government employers.

2. Prior to 2010, Massachusetts data was not available, representing a very small share of job linkages to Maine.

3.  An individual’s primary job is the one with the highest earnings (some people have multiple jobs). Job-to-job hires and separations are those with little or no time between jobs.