Once again, we begin the countdown to the unemployment report due on Friday by parsing the Job Openings and Labor Turnover Survey (JOLTS) report on the number of job vacancies in the U.S. economy. The August report shows an extremely tight labor market.
Firstly, the JOLTS report tells us there is a definite worker shortage at a time of record employment. This has given labor unions the upper hand in negotiating new labor contracts.
Job openings, a measure of labor demand, were up 690,000 to 9.610 million on the last day of August. That was the biggest jump in two years, reported Reuters. Data for July was revised higher to show 8.920 million job openings instead of the 8.827 million previously reported.
“Over the month, the number of hires (blue line in graph) and total separations (light blue bar) changed little at 5.9 million and 5.7 million, respectively,” said the Bureau of Labor Statistics (BLS). “Within separations, quits (3.6 million) and layoffs and discharges (1.7 million) changed little.”
This means the unemployment rate and nonfarm payroll count due out Friday may change little as well. The difference in the JOLTS report between hires and separations was 200,000 (5.9m-5.7m). The consensus for Friday’s unemployment report is an increase of 150,000 to 170,000 nonfarm payroll jobs with the unemployment rate holding at 3.8 percent.
FREDunemployment
To give us an idea of its significance, the unemployment rate has been below 4 percent since January 2022, and just five times since the 1950s. Why so low currently? Because all the post-pandemic government recovery and development aid is priming economic activity. Never since World War Two has government spent so much on modernizing our economy.
Another jobs report by payroll processor ADP said U.S. private-sector employment rose by a tepid 89,000 in September, perhaps a sign the labor market is catching a chill in the early fall, said one commentator. That’s the smallest increase in two and a half years.
The ADP payroll estimate can offer clues on the strength of the labor market, but it’s not an accurate predictor of the government’s official employment report that follows. The two reports often vary widely from month to month, as was the case during the summer, even if they move in the same direction over time.
There is a solution to the labor shortage and such a tight labor market. More workers are entering the workforce, which is the best solution to the worker shortage. An additional 736,000 entered the workforce in July, including an influx of immigrants.
That is another reason the Fed might want to pause any further rate hikes.
Harlan Green © 2023
Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen
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