Tuesday, January 8, 2019

JOLTS day: January 2019

The JOLTS data for November 2018 came out this morning, but there isn't much change in the assessment of the possibility of a future recession (per here). The openings data is still showing a negative deviation:


One thing that is a bit more clear is that the log-linear slope (i.e. the "dynamic equilibrium") of the JOLTS openings data for the past 18 24 months is definitely lower:


That's a linear fit to the (log of the) openings data since 2011 up through 18 24 months ago alongside a quadratic fit to the full range.

The hires data still doesn't show a deviation. Based on this model which puts hires as a leading indicator, we should continue to see the unemployment rate fall through April of 2019 (5 months from November 2018):


The gray dashed line is a counterfactual recession of average size and width (steepness) that reaches the edge of the confidence band in April of 2019 — it gives a rough estimate of the soonest a typical recession will show up as a rise in the unemployment rate based on the linked model that combines several dynamic equilibrium models of different measures into a single system. However, as noted above, openings might well be the leading indicator in the next recession (hires led the 2008 recession and appears to have led the 2014 mini-boom, but that's a very limited number of shocks to work with). The hires measure could also be off by a couple months based on estimated error.

Part of the reason I put these models out there is to make predictions — right or wrong. Being wrong tells us something just as valuable as being right!

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