Tuesday, February 28, 2017

Another Clue About Labor Market Softness: The Decline In Single Quarter Jobs

One feature of the JOLTS data that has changed over the last several years are that both hires and separations (leaving a job for any reason) have declined. Together, these mean that workers are staying one place longer.

Some people start and end jobs in the same quarter. New research (here’s the working paper, since they want you to pay for the journal article) suggests that half of that decline in hires and separations is from a decline in those single quarter jobs. But there’s a problem:

[These jobs are] commonly held by younger workers and by those who take jobs at newer firms, but, nevertheless, the aging of the workforce and the decline of business startups explains relatively little of the decline in single quarter jobs. [emphasis added]

So what does cause the decline of single quarter jobs? It turns out they couldn’t find a decent answer.

The decline of single quarter jobs is not accompanied by individuals substituting long duration jobs for short duration jobs, but is merely part of an overall decline in jobs of both short and long durations.

But maybe the decline is a good thing:

We analyze whether single quarter jobs are “stepping stones” that allow individuals to move into longer duration and presumably higher paying jobs … We find some but not much evidence for this stepping stone aspect of single quarter jobs.

Interestingly, single quarter jobs are treated differently in the creation of two stylized facts about the labor market. One is that earnings have stagnated, and it turns out this stylized fact is developed by including single quarter jobs. The other in increasing inequality, and it turns out this stylized fact is developed by excluding single quarter jobs.

For earnings stagnation, it turns out that including single quarter jobs makes the average wage go down (no one is surprised that single quarter jobs are lower paying), but it also reduces the stagnation. This suggests that for workers that come and go — essentially, a spot market — the labor market is working just fine. Therefore, it’s not working just fine for long term employees, and combined with stagnating earnings, suggests that employers and employees are tied into too many poor long-term relationships.

For income inequality, the exclusion of single quarter jobs reduces measured inequality, but leaves it with an upward trend: this suggests that inequality is mostly about some people lucking into long-term jobs that are really good. Including them increases inequality (because single quarter jobs are mostly low end), but turns the trend in inquality downward. That’s what we’d expect if these low end single quarter jobs were going away.

Taken all together, this adds more evidence to the weird feature of the U.S. economy in the 21st century: people need to be more fluid … there really are more people stuck in ruts than before.

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