Labour market flows revisited

It's been a while since I've looked at patterns in gross labour market flows; the last time was here. The basic methodology is taken from Stephen Tapp's  CJE article, in which he extracts labour market transitions from the Labour Force Survey Public Use Microdata Files. Not all transitions are covered by the LFS questionnaire, but we can get recover some of them:

1. Hires: People who are employed, and who have been at their current job for one month or less.
2. Layoffs: People who have been unemployed for 4 weeks or less, and who were laid off from their previous job.
3. Leavers: People who have been unemployed for 4 weeks or less, and who left their previous job of their own accord.

Ideally, we'd like to be able to track the transitions between all three states - employed, unemployed and not in the labour force, but I can't do that with the PUMF. For example, hires include people who had been previously unemployed, those had been previously out of the labour force, as well as those who were had been working at other jobs. I believe it's possible to do this using the master LFS files, and I seem to recall seeing work that did exactly that, but I can't bring it to mind.

That being said, I think these estimates provide some insight into the business cycle features of gross labour market flows. For example, the estimates for layoffs and for new Employment Insurance claims look reassuringly similar in scale and in variation:

All these estimates are not seasonally adjusted, so I'm using 12-month moving averages in the graphs.

Here are the main flow estimates:

That large gap between hires and the layoffs/leavers has to be taken with a grain of salt: it includes job-to-job transitions, and people hired from out of the labour force. But the point to take from here is that monthly gross jobs flows are an order of magnitude greater than the monthly net changes.

You can also see what happens during recessions: layoffs spike up, and hires drop off. This is most visible in 2008-9, but you can also see it in 2000-01. And if you squint and hold the screen at a certain angle, you can see a slight increase in layoffs accompanied by a slight fall in hires in the first half of 2015.

I've used this approach to look at transitions in the manufacturing sector during the resource boom (pdf). What I found was the the decline in manufacturing employment was largely driven by attrition. The decline in employment was due to a reduction in hiring, not an increase in layoffs:

The same picture emerges even if you adjust these flows to take into account the declining size of manufacturing employment:

Manufacturing workers are less likely to be laid off now than at any point in the last 17 years.

Now that the resource boom is over, I thought it would be worth breaking out the 'Mining and oil and gas extraction' sector as well.

The employment flows in the resource sector are similar to what they looked like during the recession. It looks as though the worst may be over: because layoffs in August 2015 were less than in August 2014 (although still high), the 12-month moving average fell. I'll come back to this in a few months.

Finally, some cross-industry comparisons. In addition to manufacturing and mining and oil and gas extraction, I've also broken out public sector employment: the rest was dumped into an 'Other private' category. Layoffs first:

I don't think that anyone will be surprised to learn that layoff rates in the public sector are less than half than layoff rates in the private sector. But it's interesting to see that layoff rates in manufacturing and in mining and oil and gas extraction are most affected by the recession.

And here are hires:

 

Again, the low hiring rates in the public sector are unsurprising. The scale of the hiring rates - especially in the 'Other private' sector is worth noting: almost one worker in 40 has been on the job for less than a month.

Finally, job leavers, and this one surprised me:

 

Public sector workers are much more likely to leave their job voluntarily than are private sector workers. It's worth remembering that these job leavers are all unemployed; we don't observe job-to-job transitions. For reasons I don't yet understand, public-sector workers are more likely to quit their jobs voluntarily and try their luck looking for another.

 

Comments

[Nick Rowe]

Does "job leavers" include retirements? If so, that might explain part of the higher public sector job leaver rates; you don't get laid off, so ultimately you retire?

[Frances Woolley]

One thing that might be going on in the public sector is that people don't get let go all that often. I suspect in other jobs people get laid off rather than leave. Also, the public sector has relatively good severance pay, and very high rates of EI eligibility. This data only covers people who are laid off and haven't found another job yet - a minimum wage worker with no severance package and no EI eligibility doesn't have the luxury of waiting to take something.

Also age and gender differences might explain part of it.

Also I suspect in the private sector there may be quite a few direct job-to-job moves - people don't leave their job until they've got something else. Those aren't captured in your data.

[Stephen Gordon]

Nick: No, the current labour force status is reported as 'unemployed'. If they were retired, it would be 'not in labour force.'

Frances: That's what I was thinking as well. A public sector worker is probably more likely to be in a position to accept a short transition in and out out unemployment during what is essentially a job-to-job transition.

[Majromax]

Do public sector numbers break down by subfield? You might be seeing seasonal unemployment, for example in education with supply teachers that are unemployed over the summer.

[Stephen Gordon]

No, I can't break it down further than that. There are data by industry, but then you lose the public/private distinction.

But there is a huge seasonal spike in public sector layoffs in July; those are presumably teachers. There's also a seasonal spike in public sector hires in May (summer jobs?) and again in September (probably teachers again).