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 rose to 94.9 in October, the first month-over-month gain since July and better than economists had expected, although still well below the 42-year average (98.0). Five of the ten main components that make up the headline sentiment index improved last month, with the largest gain seen in owners’ plans to boost inventories. Expectations for both sales growth and the overall economy were notable weak spots in October. As for small business employment conditions, job creation stalled and hiring plans were unchanged last month, but the total number of job openings rose markedly. Further, current wages increased and reported plans to raise compensation over the next three months jumped, not surprising since nearly half (48 percent) of respondents are still complaining that there are “few or no” qualified applicants for vacant positions. Elsewhere in the report, the top two problems facing surveyed small business owners were once again taxes and government regulation but “quality of labor” continues to be a growing challenge. Many owners were also worried about poor sales in October, which is worth monitoring going forward because such concerns often lead unemployment. Bill Dunkelberg, NFIB’s chief economist, added that “The election will likely change the amount of uncertainty in the economy. This will convert “uncertain” and “don’t know” views into firmer views, bad or good, and trigger actions to protect against anticipated policies or take advantage of the expected improvement in the economy. While new uncertainties will likely emerge, the level of uncertainty should diminish.”
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, was released this morning and it showed that there were 5.486 million job openings in America in September (lagged release). That was an increase from August’s upward-revised 5.453 million print but still one of the lower readings of 2016 to date. Moreover, total hires fell in September to 5.081 million, the first month-over-month decline since May and not too surprising considering that nonfarm payrolls growth has slowed in recent months. Annual growth in both hires and job openings also remains weak compared to the past few years, and will therefore be worth monitoring over the next few months to determine if this is a short-term trend or the start of something bigger. Elsewhere in the report, the number of unemployed workers per job opening ended September at 1.40, the best reading in four months. Even more encouraging is the ratio of quits to layoffs and discharges, which jumped to 2.08 in September, the best reading since the turn of the century and a sign of U.S. workers’ increased willingness to give up their current job security for better employment opportunities.
Sources: Econoday, Twitter, Bloomberg, ZH, NFIB, U.S. DoL, FRBSLPost author: Charles Couch