Adjusted Estimates of Worker Flows and Job Openings in JOLTS

Adjusted Estimates of Worker Flows and Job

Openings in JOLTS

May 2008

Steven Davis, University of Chicago and NBERJason Faberman, Federal Reserve Bank of PhiladelphiaJohn Haltiwanger, University of Maryland and NBERIan Rucker, Bureau of Labor Statistics

The views expressed are solely those of the authors and do not necessarily reflect the official positions or policies of the US Bureau of Labor Statistics, the US Bureau of the Census, the Federal Reserve Bank of Philadelphia, the Federal Reserve system or the views of their staff members.

Introduction

The behavior of hires and separations is an important topic for labor and macroeconomics Relevant for several classes of models

Labor search and matching, factor adjustment, etc. Useful in understanding important margins of

cyclical employment fluctuations e.g., are recessions hires-driven or job loss-driven?

JOLTS data are the best new source on hires and separations, but JOLTS data raise new questions Accurate measurement of magnitude, cyclicality of

worker flows critical to understanding employment fluctuations

What is the JOLTS?

JOLTS is a monthly survey of ~16,000 establishments Has employment, number of hires, number of separations

(by quits, layoffs & discharges, and other separations) throughout month, and number of job openings at end of month

Published statistics Begin in December 2000 Available by major industry and region for all nonfarm

establishments

Our study… Uses both published data and micro data for Jan-01 – Dec-06 Appeals to fact that JOLTS sample frame is the BED (QCEW)

data Focuses only on private establishments

JOLTS Measurement Issues

JOLTS has three notable measurement issues Two issues are observable in the published

data

JOLTS hires and separations estimates overstate growth relative to its benchmark estimates (CES)

Issue 1 – Overstatement of CES Growth

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Employment(000s)

Cumulative JOLTS Implied Employment

Employment Implied by JOLTS Hires - Separations

CES Employment


JOLTS has three notable measurement issues Two issues are observable in the published

data


Magnitude of hires and separations data smaller than comparable estimates e.g., CPS gross flows data

Issue 2 – Worker Flow Magnitudes

Hires Rate Separations

Rate JOLTS Published Statistics 3.4 3.3 CPS Gross Flows, Fallick-Fleischman (2004)

6.4 6.4

Employer-employee data from Davis-Faberman-Haltiwanger (2006) also suggest estimates are understated


JOLTS has three notable measurement issues Two issues are observable in the published data


Magnitude of hires and separations data smaller than comparable estimates e.g., CPS gross flows data

Micro data show: JOLTS over-represents stable establishments and misses entry and exit Nature of the survey frame and sample nonresponse

may play a role

Issue 3 – JOLTS Growth Rate Distribution

BED distribution also shows greater shifts in moving between high-growth and low-growth quarters

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JOLTS BED

Goals for this Paper

Adjust JOLTS hires, separations, and job openings to reflect the universe growth rate distribution Adjustment uses universe quarterly growth rate

distribution from BED as “true” underlying distribution in economy.

After frequency adjustment, it interacts BED distribution with JOLTS data on mean worker flows and job openings rate by growth rate to construct adjusted measures.

Compare adjusted and unadjusted JOLTS measures Quantify change in magnitudes Compare any differences in cyclicality

Summary of Results

Adjusted worker flows are about one-third larger than published statistics Separations increase disproportionately

through increase in layoff rate

Adjustment alters relative volatility of hires and separations Volatility of hires declines, while volatility of

layoffs doubles, making separations more volatile than hires overall

Little change in Beveridge Curve (unemployment and vacancies) behavior

Adjustment Approach

Adjustment based on identity that aggregate estimate is equal to weighted sum of values for each growth rate

xt(b) = mean value over growth rate “bin” b Can obtain from monthly JOLTS micro data

ft(b) = employment density for growth rate “bin” b Will replace JOLTS densities, after some

adjustments, with BED values

b

ttt bfbxX )()(

Adjustment Step 1 – Estimating Mean Rates

Estimate mean worker flow and job opening rates for fixed growth rate intervals using JOLTS microdata

Rates show nonlinear relations to growth Relations vary little over time

Hires Rate

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Rate

Job Openings Rate

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Rate

Layoffs Rate

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Rate

Quits Rate

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Adjustment Step 2 – Density Creation

Adjustment replaces JOLTS densities with BED densities by growth rate interval

Estimation of monthly-quarterly relationship:

Predicted JOLTS density based on BED data:

Issues to Consider Only BED densities account for entry, exit

Rescale JOLTS densities; add in estimates of entry and exit

BED are quarterly, JOLTS are monthly Adjust BED based on monthly-quarterly relations

observed in JOLTS

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Results

Published Statistics Adjusted Statistics Means (Quarterly Standard Deviations)

Hires Rate (H) 3.78 (0.23)

4.99 (0.16)

Separations Rate (S) 3.70 (0.16)

4.96 (0.19)

Quits Rate (Q) 2.06 (0.17)

2.36 (0.15)

Layoffs and Discharges Rate (L) 1.40 (0.07)

2.28 (0.15)

Other Separations Rate (R) 0.24 (0.02)

0.31 (0.04)

Job Openings Rate (V) 2.71 (0.38)

2.91 (0.35)

Magnitudes of hires, separations increase by one-third Volatility of separations increases (through layoffs) Net growth (H – S) decreases

More Results

Published Statistics Adjusted Statistics Relative Volatilities (Quarterly) (H)/ (S) 1.47 0.85 (Q)/ (L) 2.35 1.00 (H)/ (V) 0.61 0.46 (V)/ (U) 0.66 0.60

Adjusted vs. Published Hires

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Percent of Employment

Published Rate Adjusted Rate

Adjusted vs. Published Quits

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Percent of Employment Published Rate Adjusted Rate

Adjusted vs. Published Layoffs

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Adjusted vs. Published Job Openings

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Conclusions

JOLTS data have been a major innovation in the study of labor dynamics

Initial research revealed some measurement issues

Adjusted estimates provide a different picture of labor market than published estimates Magnitudes of worker flows higher by one-third Cyclicality of separations relatively more important

Our work stresses the importance of having a survey that is representative of both levels and growth when estimating flow statistics Work hopefully aids statistical agencies in achieving

this goal

Quits and Layoffs Rates

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Time-Series Shifts in Distributions

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Adjusted Quits and Layoffs

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Percent of Employment Adjusted Quits Adjusted Layoffs

Documents

Adjusted Estimates of Worker Flows and Job Openings in JOLTS