We reported on our blog that Hiring Demand increased 2.4% in July even as Employment fell by 247,000 non-farm workers. How can Employment fall if Hiring Demand is on the rise?
Changes in Employment are driven by two processes – Exits and Hires. In fact, we can construct a "Job Accounting Identity":
Change in Employment = Hires – Exits
If 10 people are hired but 20 people exit, the change in employment is -10 (10 – 20 = -10). If 20 people enter the labor force but only 10 leave, then the change in employment is +10 (20 – 10 = 10). More people entering the workforce than leaving is what generates gains in employment.
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