Job Openings Still At Record Level

The number of job openings rose to 5.5 million on the last business day of January, the U.S. Bureau of Labor Statistics reported today. It is just below the record high set in July 2015.  Hires declined slightly to 5.0 million while separations edged down to 4.9 million. The JOLTS report highlights the millions of jobs actually lost and created each month. It highlights the rising number of job openings, which means more of the unemployed are finding work. And economic growth generally follows job growth.  

The quits rate was 2.0 percent (looked at by the Fed because it tells them how many are voluntarily leaving their old job to find a better new job), and the layoffs and discharges rate was down to 1.2 percent.

The following graph shows job openings (yellow line), hires (dark blue), Layoff, Discharges and Other (red column), and Quits (light blue column). The number of job openings (yellow) are up 11 percent year-over-year compared to January 2015.  Quits are up 1 percent year-over-year. This is a sign of growing job opportunities as quits are voluntary separations. (see light blue columns at bottom of graph for trend for "quits").

Graph: Calculated Risk

            This month, more than 4.5 million people who weren’t in the labor force found a job, according to the St. Louis Federal Reserve, even though only about 7.7 million Americans were officially unemployed the previous month. Just since December, the U.S. economy has added more than 1 million jobs and brought more than 1.5 million Americans into the labor force (based on the household survey).

It is huge, folks, and can only mean younger workers are also entering the labor force—i.e., from the millennial generation that now makes up some 53 percent of the workforce and will continue to increase.  That’s because those born between 1980 to 2000 and are the offspring of the baby boomers already number some 90 million, a veritable population explosion that will boost economic growth even further, as they enter the job market. 

Barron’s Magazine, for one, has been predicting robust, 3 percent plus GDP growth for years to come because of the population explosion that will bring years of prosperity harking back to the 1970s, when the baby boomers entered the jobs market.

“Industries from housing and autos to retailing and financial services could be transformed by their collective demands and desires,” says Barron’s Jacqueline Doherty, “while their growing wealth, coupled with their doubts about the future of government entitlement programs, could usher in a new era of saving and a bull market for stocks.”

            The Millennials—sometimes called Generation Y, and defined by many demographers as ranging from ages 18 to 37—make up the largest population cohort the U.S. has ever seen. Eighty-six million strong, it is 7 percent larger than the baby-boom generation, which came of age in the 1970s and '80s. And the Millennial population could keep growing to 88.5 million people by 2020, owing to immigration, says demographer Peter Francese, an analyst at the MetLife Mature Market Institute.

            “When the baby-boom generation drove the economy in the 1990s,” continued Doherty, “growth in gross domestic product averaged 3.4 percent a year. As the Millennials hit their stride, they could help lift GDP growth to 3 percent or more, at least a percentage point higher than current levels.”

            While it is not certain exactly when such GDP growth can be sustained, both economic theory and history says that such a large surge in population will eventually create what has been missing until now—a sustained aggregate demand that has to generate much stronger growth.

Harlan Green © 2016

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