Introduction to Labor Market Reports
Labor fuels the engines of economic production, and that’s precisely why the monthly Employment Situation Summary, also known as the monthly jobs report, commands so much attention from investors and economists alike. In addition to serving as a barometer for the economy, it’s also one of the first major economic reports of the month, and typically sets the tone for all the others that follow.
Understanding the Jobs Report
The jobs report gives you a comprehensive overview of job creation, unemployment rates, and wages in almost every sector of the economy (except for farming). In this way, it sort of reigns supreme as far as labor reports go. But it isn’t the only player on the field. There are others that can give you a more nuanced and timely reading, perhaps enough to show you the forces that eventually lead up to the big jobs report. We’re talking about the initial jobless claims report and the Job Openings and Labor Turnover Survey (JOLTS).
Initial Jobless Claims Report
What it is
Initial jobless claims is a weekly report that tells you the number of people who have lost their jobs in the previous week and are seeking unemployment benefits. It includes two sets of unemployment benefits seekers: initial claims, meaning people who lost their jobs and are filing for the first time, and continued claims, or those who are already receiving unemployment benefits and are continuing to file to receive them.
How to Interpret it
By watching the overall trend in job losses over several weeks, you can form an opinion as to whether the labor market is strengthening or weakening. A trend in increasing numbers can signal a downturn in the nation’s labor market, while a decreasing number might indicate stability and growth. However, you have to take these numbers in context. When inflation is rising, decreasing numbers (indicating higher employment) can mean that the economy isn’t slowing enough to bring down prices—not a good sign for an overheating economy.
What it Can Tell You
The initial jobless claims report is the closest to real-time you can get when following labor trends. You can see the conditions leading up to (and following) the job report’s monthly unemployment rate. As an investor, you might be able to anticipate (or just avoid being taken by surprise by) the big jobs data reveal each month, giving you a slight edge if your market decisions are based on the nation’s employment.
Job Openings and Labor Turnover Survey (JOLTS)
What it is
JOLTS is short for Job Openings and Labor Turnover Survey. And as the name says, it reports on the number of job openings, hires, and separations (including those who quit and those who are fired) from the labor market (again, farm jobs aren’t counted).
How to Interpret it
JOLTS can tell you a lot about labor demand because it’s the only major report that provides job openings data. A large number of job openings can mean the labor market is “tight,” while a small or decreasing number indicates the labor market is “soft” or softening. In a tight market, companies are looking to hire more workers, indicating that the economy is growing. The opposite is true of a soft market.
What it Can Tell You
JOLTS highlights the number of job openings, and it’s broken down by industry. It also provides a granular picture of hires, but it separates “quits” (those who voluntarily leave their jobs) and separations (which combines quits, layoffs, and terminations). During the post-COVID-19 recovery, when inflation began to rise, the number of openings and quits—both exceedingly high—told us something very important about the labor market and economy: Many people were willing to quit their jobs to demand higher wages and better working conditions.
Other Labor Market Reports
Yes, there are job reports published by private entities. For example, the ADP National Employment Report, released by Automatic Data Processing (ADP), is a monthly report that, like the jobs report, can give you another angle to analyze the nation’s labor market. If you’re not already familiar with economic data generated by private companies, they’re well worth a look, especially if you seek a second opinion or just a different take from Uncle Sam’s economic assessment.
Conclusion
The Employment Situation Summary gives you a comprehensive snapshot of the labor market; the initial jobless claims report and JOLTS offer additional, nuanced perspectives. Plus, each report can bring a few things to the table that the big jobs report can’t. Together, they equip you with a richer picture, empowering you to make better decisions when investing. By understanding these reports and how they complement each other, you can gain a deeper insight into the labor market and its trends, ultimately helping you navigate the complex world of economics and investment.
