There are two important reports on the U.S. economy worth mentioning this morning. First, the latest job openings and labor turnover survey (JOLTS) from the Bureau of Labor Statistics showed that there were 7.323 million job openings in America in May (lagged release). That was below estimates and the April figure was revised lower, but total vacancies remain near a record high and continue to easily exceed total hires. In fact, the hires-per-job-opening ratio in May held below 1.0 for the vast majority of U.S. industries, suggesting that most firms are having a difficult time filling vacancies. Similarly, there were roughly 1.4 million more job openings in May than out-of-work Americans, the 15th straight month that vacancies have outnumbered job seekers in this country. The ratio of quits to layoffs and discharges, an indicator of workers’ willingness to give up their current job security for better employment opportunities, also remained elevated in May. Although supportive of wage growth and improved benefits offerings, this environment can lead to greater consumer inflation as businesses try to pass on the rising cost of labor. Higher productivity growth, though, has helped keep inflation in check recently.
Elsewhere, small business owner confidence softened last month, according to a new report from the National Federation of Independent Business. Specifically, the headline optimism index ended June at 103.3, a larger decline than expected following the 6-month high hit in May. Six of the ten main components that make up the sentiment index deteriorated in June, including marked declines in surveyed owners’ outlooks for sales growth, profitability, and capital investment. Employment conditions also moderated last month, with gauges of both current and future job creation weakening. Wage growth cooled as well in June, but this followed a spike in the prior month. Moreover, reported complaints about a lack of qualified job applicants pulled back notably in June, likely a reflection of the earlier uptick in worker compensation. Altogether this was a somewhat disappointing report, but most measures of business activity and owner optimism remain at historically strong levels, albeit below the 2018 extremes. Further, based on other small business data released this month, much of the recent weakness has likely been concentrated in industries with a greater exposure to tariffs and the general uncertainty foisted onto the economy by the still unresolved trade war. Once an accord is finally reached it could wind up providing a welcome stimulus to companies of all sizes.
Sources: Econoday, U.S. DoL, NFIB, FRBSL
Post author: Charles Couch