Oregon’s Labor Leverage Ratio Shows a Slightly Looser Labor Market
August 23, 2023With extremely low unemployment, the job market remains tight. Businesses struggle to find workers and jobseekers encounter plentiful opportunities. However, by several measures the labor market may be slackening just a little at the edges.
One measure that has received a lot of attention recently is the “Labor Leverage Ratio (LLR)” popularized by economist Aaron Sojourner at the W.E. Upjohn Institute.
The LLR is very simple: it is the ratio between the number of voluntary quits and the number of layoffs or firings. Looking at these two numbers in relation to one another is a proxy for measuring how confident each side of the labor market is – the buyers (employers) and the sellers (workers).
The graph above shows the Labor Leverage Ratio in Oregon and the U.S. since 2008 in a three-month moving average to smooth out some of the extremes. Generally, Oregon has tracked closely with the U.S., although at most times since 2016 Oregon experienced a slightly higher ratio than the nation.
When the ratio is high, more people are quitting their jobs than are being laid off, signaling that workers are confident they can find employment and businesses are loath to lose workers. A ratio of greater than 1.0 is typical, which means in most months more people leave their job by their own choice than are fired. The exceptions are in the depths of recessions like 2009 or 2020, where layoffs spike and quits tend to decline.
In both Oregon and the U.S. the LLR has declined since peaks in 2022. Layoffs have increased slightly at the same time that quit totals have come down a bit since the middle of last year. Neither trend seems to signal a massive souring of the job market. The more likely explanation is a slight moderation of the extreme competition for workers experienced last year.
As you might expect, the LLR varies quite a bit by industry and state. You can explore differences by industry at the link defining the Labor Leverage Ratio at the beginning of this article.
The data to create this graph came from the Bureau of Labor Statistics’ Job Opening and Labor Turnover Survey (JOLTS), which releases data for the U.S., 50 states and D.C., as well as national data by industry. In May 2023, the most recent month of finalized data, Oregon had an LLR of 2.5, 30th among the states. The three states with the highest LLR were Arizona (4.1), Alabama (4.1), and Texas (3.5), while the three lowest states were Iowa (1.9), Rhode Island (1.9), and New Hampshire (1.5).