WVR – Workforce Vitality Report

Four types of workers:

In practice, in order to separate workers into the various types, the ADP WVR model tracks two months: the current month t, and the previous month t-1:

  1. Holders: Jobs where the worker was hired prior to t-1 or hired in t-1 with positive pay in that month. If workers in these jobs are determined to have worked their job for the entirety of month t, all other ADP employment recorded for the same worker (e.g. second jobs) is also designated as a holder.

    NOTE: For publication purposes, the job holders group is further subset to include those workers who have held the same job for at least the last 12 months. This allows for the calculation of over-the-year wage growth from a uniform set of workers who have held their job for at least that period of time.
  2. Switchers: Current period jobs not assigned to holders where workers were employed by a different ADP firm in month t-1.
  3. Entrants: Jobs not assigned to holders where workers were not employed by an ADP firm in month t-1.
  4. Leavers: Workers who were with an ADP firm in t-1 but are no longer in the ADP sample in month t.

Six Indicators:

  1. Total employment growth: This metric is defined as percentage increase in employment from a year ago. As a widely watched labor market indicator, employment growth is the fundamental measure of labor market vitality. Higher employment means more job opportunities for job seekers and more competition among employers. This too can be disaggregated for different dimensions. While this component is readily available from government sources, growth in combined dimensions is less readily available.
  2. Job switchers’ wage growth: Change in nominal hourly wage rate between the new job and the old job. This is a unique indicator not available from government sources. The initial wage offer is more sensitive to labor market conditions compared with wages of job holders. A higher wage offer is often a result of a tighter niche labor market where employers compete for talent. The ability of job switchers and, in particular, a specific job switcher defined by age, tenure, gender, pay scale, industry and region to command a higher wage is of particular importance for HCM. For example, the wage change for job switchers between minimum wage earners and high income switchers can be very different. While the former may be hard pressed to find better paying new jobs, the latter can boost their wages by moving to a new position.
  3. Job holders’ wage growth: This metric is defined as percentage change in hourly wages from a year ago for job holders who held the same job for at least a year. Although the magnitude of wage changes of job holders is often smaller than that of job switchers, an improving labor market will eventually increase the pay of job holders as employers use monetary incentives to retain talent and raise productivity. Both the job switch rate and the change in nominal hourly wage rate for job switchers is likely to lead changes in the hourly wage rate for job holders. However, workers across specific dimensions, such as particular industries or wage levels, may be able to bargain for higher wages sooner in the business cycle than workers in other dimensions.
  4. Job holders’ hours growth: This variable characterizes the intensity of labor utilization. When a specific labor market is sluggish, weak demand causes under-utilization of labor. When the specific labor market picks up, working hours increase as production expands. Hours worked have leading properties as workers in certain industries or wage scales or parts of the country may be working more hours earlier in the business cycle than other workers. In addition, firms that employ high-skilled workers tend to retain their employees by cutting worker hours during downturns so as to avoid the search and rehiring costs when the economy rebounds. As such, fluctuations in hours worked vary across industries with different concentrations of skilled workers.
  5. Switching rate: The percentage of workers who successfully changed their jobs within one month. In contrast to the separation and quits rates reported by the BLS, the job switch rate gives a clear indication of labor market conditions by isolating those workers who successfully changed their jobs and excluding those whose departure was due to retirement or company closure or who dropped out of the labor force. Because the majority of those who land a new job left the previous job voluntarily, the job switching rate increases when labor market conditions improve. This component is of particular interest in distinguishing labor market conditions for different dimensions of workers to ascertain whether, for example, higher or lower wage workers are switching jobs, whether workers of a certain age or tenure on the job are switching or staying put, or whether workers in certain industries or certain regions of the country are switching jobs.
  6. Turnover rate: The percentage of workers who either successfully changed their jobs or left their job within one month. The switching rate (above) is one piece of the turnover rate, which provides a more holistic view of the churn in the labor market. The turnover rate captures all separations from a job held in the previous month, whether the separation was voluntary or involuntary and whether the separation resulted in another job being acquired or not. A higher turnover rate can sometimes imply a strengthening economy, but since it also includes retirements and involuntary separations, sometimes the relationship is less clear.

Dimensions

The WVR metrics are constructed for as many dimensions and combinations of dimensions as the data will allow. A list of the definition of dimensions is as follows:

  1. Geography (15 total areas, including U.S.):
    1. Region: Northeast, Midwest, West and South
    2. State: New York, New Jersey, Pennsylvania, Texas, Florida, California, Illinois, Washington, Michigan and Ohio
  2. Industry (11 total industries, including total private) - based on North American Industrial Classification System (NAICS):
    1. Resources and mining (21), construction (23), manufacturing (31, 32, 33), trade, transportation, and utilities (42, 44, 45, 48, 49, 22), information (51), finance and real estate (52, 53), professional services (54, 55, 56), education & healthcare (61, 62), leisure & hospitality (71, 72), other services except public services (81)
  3. Firm size: 1-49, 50-499, 500-999, and 1,000 and above
  4. Age: 24 or younger, 25-34, 35-54, 55 and older
  5. Gender: Male and female
  6. Full and part time: Full-time workers are defined as those whose weekly hours is greater than and equal to 35
  7. Wage tier: Based on nominal annual wage; less than $20,000, $20,000-$50,000, $50,000-$75,000, and greater than $75,000
  8. Tenure tier: Two years or less, 3-5 years, 5-9 years and 10 years and above

In addition to individual dimensions, the ADP WVR model also produces metrics for many combined dimensions. The feasibility of various combinations is dictated by data availability and quality. An outline of the dimension coverage is below and the resulting output produces estimates for more than 60,000 individual dimensions in a given month.

Example: Dimensions are crossed in the following combinations (# of dimensions in parentheses):

Geography (15)* Industry (11) *Size Class (5) *Gender (3)* Age Tier (5)* Wage Tier (5)

Geography (15)* Industry (11)* Size Class (5) *Tenure Tier (5)

Geography (15)* Industry (11)* Size Class (5)* Full-time/Part-time (3)