There were two important reports on the U.S. economy released this morning. First, the National Federation of Independent Business’s (NFIB’s) small business optimism index fell to 103.6 in June, worse than expected and the lowest headline reading since November. Under the hood, five of the ten main components that make up the sentiment index deteriorated in June, including large declines in surveyed owners’ expectations for sales and the overall economy. As for small business labor conditions, job creation in June turned negative for the first time in eight months, and gauges of both hiring plans and total job openings also softened. At the same time, the percentage of small business owners complaining that there are few or no qualified applicants for open positions fell to an 8-month low. That likely contributed to the decline in the number of respondents planning to raise worker compensation in the coming months. Elsewhere in the report, the top two problems facing surveyed small business owners were once again taxes and government regulations, which together have been big drivers behind the recent softening in confidence. Bill Dunkelberg, NFIB’s chief economist, added that “A continuation of the high levels of optimism in the small business sector will depend heavily on Congressional progress on the major issues for small business owners: healthcare, tax reform and regulatory relief. … More substantial progress is needed on these major issues if owner optimism is to be sustained and produce accelerated hiring and spending.”
Elsewhere, the latest job openings and labor turnover survey (JOLTS) from the Bureau of Labor Statistics, one of Federal Reserve Chair Janet Yellen’s favorite economic indicators, showed that there were 5.666 million job openings in America in May (lagged release). That was a big decrease from April’s downward-revised 5.967 million print and the worst headline reading since January. Total hires, though, jumped in May to the best level in roughly one-and-a-half years. That helps explain the decline in openings but is still a bit surprising considering how weak nonfarm payrolls growth was that month. On a year-over-year basis, both hires and job openings continued to expand in May but the pace of annual growth has clearly slowed over the past two years. However, the labor market remains relatively strong, and the number of unemployed Americans per job opening and the ratio of quits to layoffs and discharges both continue to hover around the best levels on record. The latter highlights U.S. workers’ increased willingness to give up their current job security for better employment opportunities.
Sources: Econoday, Bloomberg, Twitter, NFIB, U.S. DoL, FRBSLPost author: Charles Couch