Wednesday, February 1, 2017

Latest Employment Dynamics Data Show Worrisome Decline In Labor Market Fluidity

The monthly employment situation report from the Bureau of Labor Statistics always makes headlines, but other BLS data, although less closely watched, can reveal long-term trends that are even more important. The latest data on business employment dynamics are a case in point.

The Business Employment Dynamics project tracks data on total jobs created and destroyed by US firms, based on a quarterly sample survey. Unlike the monthly jobs data, it looks separately at jobs created by new and expanding firms and jobs destroyed by firms that close or contract. The chart shows those data through Q2 2016.  

One's first impulse, in looking at the employment dynamics data, is to focus on net job gains. The data show an unbroken string of net job gains since the beginning of the recovery from the Great Recession. That is certainly good news, even if it only confirms what we already knew from the monthly payroll jobs data.

If we read the chart differently, though, we get a picture of long-term trends that is not so favorable. Suppose that instead of subtracting job losses from job gains, we add the two numbers. That gives us a measure that economists call the job reallocation rate. What does this unfamiliar number tell us that data on net job gains do not? >>>

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