Today, we are honored to introduce to you the Pavel Skrzypzynski, Economist at the National Bank of Poland. The views expressed in this article are those of the author and should not be attributed to the National Bank of Poland.
We’ve updated the job-to-worker gap discussed in our previous post: [1], [2], [3].
The recent releases of “Employment Situation – January 2023” and “Job Openings and Labor Turnover – December 2022” from the US Bureau of Labor Statistics allow us to update the job-worker gap and business cycle indicators based on it. For January 2023, we assume the level of job vacancies falls from 11 million in December 2022 to 10.7 million, which is consistent with what Indeed’s high-frequency data suggests (https://www.hiringlab.org/data/).
In January 2023, the gap between jobs and workers was 3.0% or 5.0 million, down 0.2 percentage points or 0.3 million from December 2022, but the month-on-month change in December 2022 was 0.5 percentage points or 0.9 million respectively.
figure 1. Job-worker gap (percentage)
With these new data, the Job-Worker Gap Business Cycle Indicator (JWGBCI) increased from -0.56 points in December 2022 and -0.64 points in November 2022 to -0.45 points in January 2023, still above -0.93 point decay threshold. Recall that the indicator uses smoothed gaps, ie we calculate the change in the three-month moving average of the job-worker gap relative to the previous 12-month maximum.
figure 2. Job-Worker Gap Business Cycle Indicators (Percentage Points)
How much does the m/m change in the employment-to-worker gap need to be to February 2023 to predict a recession? The job-worker gap (unsmoothed) needs to fall from 3.04% in January to 1.27%, or 1.77 percentage points, or 3.7 standard deviations of historical volatility. The chart below shows this change (marked in red) from a historical perspective. A change of this magnitude seems unlikely, as it would likely mean a deep contraction in either employment or job vacancies, or both, as of February.
image 3. Job-worker gap 1-month change (percentage points)
The conclusion of this update is similar to the previous update. Recent job-worker gap readings and business cycle indicators based on it suggest that the labor market remains tight and resilient to monetary policy tightening.
This article was sponsored by Pavel Skrzypzynski.
