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March 5, 2015 / Toby Dayton

The 2015 NFP Roller Coaster Ride Starts Tomorrow

In perhaps the biggest understatement of the week, we are a bit of an outlier for tomorrow’s NFP jobs number. Of the 94 estimates, not only are we the highest, but we’re nearly 60% above the median estimate and 80,000 jobs above the next highest estimate.

NFP_2015.03.05

Our estimate is based on the steep increase we saw in new and total job openings on LInkUp in January, which we expect preceded an increase in hiring in February. In addition to all the data we typically look at (and wrote about earlier this week with our forecast and related analysis), another important data point we examine provides, at best, some mixed signals as the projected hiring in Q1.

LinkUp’s ‘Job Duration’ report shows the length in days of jobs that have rolled off the site during the prior 6 months. So in February, for example and as depicted in the inset graphic below, job listings that rolled off of LinkUp between September and February (presumably because they were filled) had been on our job search engine for an average of just under 48 days. As that same inset graphic shows, the pace of hiring or ‘velocity’ accelerated dramatically last year, dropping from 51 days in April to 41 days in October. Since October, the average job duration has risen to 48 days.

Jobs Duration Feb 2015 (2)

Of course, the lengthening duration can be interpreted in a number of ways. During the Great Recession, companies simply decreased the volume and pace of hiring. For the fewer jobs that were being filled, employers could also be very selective in their hiring process due to the fact that labor supply was much greater than labor demand. Those factors clearly led to a slowdown in hiring or a longer ‘Job Duration.’

In the current environment, our interpretation is that demand is now greater than supply, and companies are finding it increasingly difficult to fill their openings. While that is great news for job seekers, unemployment, wage growth, and the U.S. economy in general (at least up to a point), it definitely will have an impact on monthly net job growth. With demand finally outweighing supply, wages will start to climb (which we are just beginning to see in the past few months on a large-scale basis), voluntary quits will continue to increase, and general ‘churn’ in the labor market should increase quite a bit. In general, all of those things point to continued momentum around a strengthening labor market, but they will take place in fits and starts across different job categories, sectors of the economy, and regions of the country. While we expect that job growth will remain strong over the course of the year (see our February forecast and our call for a net gain of 4 million jobs in 2015), there will undoubtedly be volatility in the monthly numbers with lots of revisions of significant magnitude. It should be a pretty fun roller coaster ride, and we look forward to our first big thrill tomorrow morning.