Wednesday, July 9, 2014

The Jolt in JOLTS (excerpt)

The latest JOLTS and NFIB surveys suggest that the US labor market is continuing to gain traction much faster than widely expected. Both show significant increases in job openings, hiring intentions, and quits. They also suggest that pressures may be starting to build for higher wages. Fed Chair Janet Yellen should be pleased. However, she isn’t likely to support raising interest rates until wage inflation actually does rebound, as I’ve discussed before. Let’s review the latest data, which are uniformly upbeat:

(1) Openings. According to the JOLTS survey, there were 4.64 million job openings during May, up 761,000 the past four months and the highest reading since the previous cyclical peak during March 2007. The ratio of total unemployed workers to job openings is down to 2.1, the lowest since May 2008.

The NFIB survey of small business owners found that during June, 26% of them said that they had one or more job openings, the highest since June 2007. The 12-month average of this series tends to be a leading indicator for wage inflation.

(2) Hiring intentions. The JOLTS survey shows that total hires remain on the slow, but steady upward trend that started in 2009. However, the openings data suggest that hiring would increase more rapidly if employers could find the workers they are seeking. The NFIB survey found that 12% of small business owners expect to increase employment, which is the highest reading of the expansion so far.

(3) Quits. The number of workers who quit their job rose to 2.53 million during May, the highest since June 2008. Here is what Yellen had to say about this and the other job turnover variables at her 3/19 press conference:

A remarkably large share of workers quit their jobs every month, usually going directly into another job. And I take the quit rate in many ways as a sign of the health of the economy. When workers are scared they won’t be able to get other jobs, they show a reduced willingness to quit their jobs. Now, quit rates now are below normal pre-recession levels, but on the other hand, they have come up over time, and so we have seen improvement. The job opening rate has also come up. The hires rate, however, remains extremely depressed, and I take that as a sign of a weaker labor market. But most of these measures, although they don’t paint the identical extent of improvement, if you ask about my dashboard, the dial on virtually all of those things is moving in a direction of improvement.

Today's Morning Briefing: Yearning for Earnings? (1) Do earnings matter? (2) Some investors matter more than others. (3) A new story that’s an old story. (4) Buybacks matter. (5) Q2 earnings estimates set for upside surprises again. (6) Still optimistic on 2015. (7) Profit margins expected to rise across-the-board. (8) Job openings spike higher. (9) Quits at cyclical high. (10) Yellen’s spin on job turnover data. (11) Europe seems to be sputtering. (More for subscribers.)

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