Job Turnover and Unemployed by Reason in the U.S. and Oregon

by Tracy Morrissette

January 31, 2019

There is a large amount of turnover in the labor market every month, as many people move between categories of employed, unemployed, and not in the labor force. Movements between these categories are known as “flows.” People move between these categories for several reasons, which generally are considered to be voluntary or involuntary. One example of a voluntary movement is retirement (a movement from employed to not in the labor force). An example of an involuntary movement is an individual who is laid-off from one job and actively seeks another (a movement from employed to unemployed).

Insight into the nature of labor market flows can be found in data published by the Bureau of Labor Statistics (BLS). This article will focus on figures from two data sets: the Current Population Survey (CPS) and the Job Openings and Labor Turnover Survey (JOLTS). Together these data provide a more complete picture of the supply and demand sides of the labor market, indicating how well unemployed individuals currently match to job openings at potential employers.

Job Turnover in the U.S. Labor Market

JOLTS data look at “labor demand” from the perspective of the business sector, showing the amount of turnover occurring in the labor market among firms. These data are collected from a monthly survey sample of nonfarm business establishments for total employment, job openings, hires, quits, layoffs and discharges, other separations, and total separations. JOLTS data are available for the U.S. and four regions; Northeast, South, Midwest and West. Oregon data are included in the West region along with 12 other states.

JOLTS data show there are millions of hires and separations at U.S. businesses each month. For example, the U.S. JOLTS numbers for November 2018 show there were 5.5 million total separations at U.S. establishments, for reasons such as layoffs, quits, and retirements, among others. This is a considerable number of separations. However, there were also a larger number of hires: 5.7 million in November. Hires represent the total additions to the payroll, including new hires, rehires, full- and part-time employees, permanent and short-term employees (such as seasonal workers), among others.

The difference between the number of hires and separations represents the net change in employment. The first graph shows the annual number of hires and separations at U.S. businesses from 2001 to 2017. When the economy is in an expansion, hires outpace separations and the net effect is jobs are added to the overall economy. The situation is reversed when the economy is in recession, where the number of separations outpaces the number of hires and the result is falling net employment.
Although there are millions of hires and separations each month at U.S. businesses, the net change in employment resulting from this monthly turnover tends to be in the hundred-thousands. Further, a large percentage of employment remains fixed from month-to-month. The hire and separation rates show these categories relative to employment levels. The hires rate is computed by dividing the number of hires by employment and multiplying the quotient by 100. The separations rate is computed by dividing the number of separations by employment and multiplying that quotient by 100. The separations rate was 3.7 percent of total employment in November, and the hires rate was 3.8 percent. 

Reasons for Unemployment in the U.S. Labor Market

CPS data look at “labor supply” from the perspective of the household sector. CPS data are collected from a monthly survey of households and used to estimate the labor force status of individuals in the U.S., which includes the unemployment rate – the percentage of the labor force that is without a job but actively seeking one. CPS data are a key input in a mathematical model that estimates monthly labor force data for states, and detailed CPS data are published annually for states by BLS. 

Individuals separated from their employers either voluntarily or involuntarily may end up in the employed, unemployed, or not in the labor force categories depending on their activity following the separation from their employer. JOLTS data do not compile statistics on what individuals do after a separation, since this survey tracks changes to payrolls at the employer level. However, the CPS data set does track the labor force status of individuals, providing an indication of the flows into labor force categories that result from job turnover at firms. Specifically, the reason for unemployment data from CPS offers insight into what is causing unemployment.

There are three main reasons for unemployment reported by BLS. These primary reasons categories are job losers, job leavers, and entrants:

  • Job losers consist of two main subgroups:
    • People who are on temporary layoff and;
    • People who are not on temporary layoff, a group that includes permanent job losers (people whose employment ended involuntarily) and people who completed a temporary job.
  • Job leavers are unemployed people who quit or otherwise voluntarily left their previous job and immediately began looking for new employment.
  • Entrants consist of two subgroups who were not in the labor force prior to beginning a job search:
    • Reentrants are unemployed people who have past work experience but were not in the labor force for a period of time prior to beginning their current job search, and;
    • New entrants are unemployed people looking for their first job. They have no previous work experience.
The second graph shows the U.S. reason for unemployment data from 1978 to 2018. The component of unemployment that increases and decreases the most over time is job losers (people unemployed as the result of a layoff). This component of unemployment is what primarily drives the unemployment rate up and down with the business cycle, as businesses lay off more people in a recession than during economic expansions.
Oregon’s Unemployed by Reason Trends Are Similar to the U.S.

The third graph shows Oregon’s unemployment by reason from 1978 to 2018. Like the U.S., Oregon’s number of job losers increases the most of all three main categories during recessions, and conversely, declines to lower levels during expansions. The number of entrants also tends to rise to some degree in the aftermath of recessions. This is known as the “added worker effect,” where either a layoff or the possibility of a layoff to one member of a household can cause other members to search for jobs to help maintain household income.
There are smaller percentages of unemployed job leavers during recessions and higher percentages during expansions. In stronger economies people are more willing to voluntarily quit a job and search for another one. In 2010, in the aftermath of the Great Recession and in the early stages of the current expansion, 71.0 percent of Oregon’s unemployed were job losers, 23.5 percent were entrants, and 5.4 percent were job leavers. These shares shifted by 2018, when the percentage of job losers declined to 48.6 percent of total unemployment, and both the share of entrants and job leavers increased to 34.2 percent and 17.2 percent, respectively.

Conclusion

The CPS and JOLTS data sets together form a more complete picture of the current state of the labor market. Together they provide information regarding how well unemployed individuals match to current job openings, in the aggregate. This information reveals the relative ease or difficultly that job seekers may have finding work given current labor market conditions. This is represented in the “Beveridge Curve,” a chart that tracks the relationship between job openings and the unemployment rate: https://www.bls.gov/charts/job-openings-and-labor-turnover/job-openings-unemployment-beveridge-curve.htm.
 
The state of the labor market changes with the business cycle. In a recession, employers respond to declines in business through a combination of layoffs, fewer job openings, and fewer hires; JOLTS data show fewer job openings and hires, and CPS data report a larger percentage of unemployed job losers. This combination of fewer job opportunities and hires at the same time that many are ending up unemployed from layoffs pushes the unemployment rate upward.

During expansions in economic activity, JOLTS data report more job openings and hires, and CPS data show a smaller percentage of unemployed job losers. This combination of more job opportunities and fewer layoffs pushes the unemployment rate downward to low levels. Further, job leavers make up a larger percentage of the unemployed during expansions as people feel more confident about the prospect of finding another job when there are more job openings and hires in the economy.

 


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