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 7.217 million job openings in America in July (lagged release). That was below estimates and the June figure was revised lower, but total vacancies remain not far from the record high and continue to easily exceed total hires. In fact, the hires-per-job-opening ratio in July 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 1.2 million more job openings in July than out-of-work Americans, the 17th 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 July. 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 August at 103.1, a larger decline than anticipated and likely exacerbated by the ongoing trade war that has dampened expectations for future business conditions. The gauge of owner uncertainty also jumped in August, and the report’s authors even said that “All this will likely translate into more caution in hiring and capital spending even though current business conditions are very positive. Pessimism is contagious, even when the real economy is doing well, expectations can be infected and turn sour. Those rooting for a recession are having a psychological impact in spite of a strong Main Street economy.” Although a prolonged, retaliatory trade war could indeed eventually be a more pronounced drag on economic activity, for now the headline small business optimism index is still at a historically strong level (top 15 percent of all readings) even after the latest pullback. Further, small business job creation actually picked up in August and future hiring plans remained elevated. Plans to boost worker compensation also increased last month, not surprising since 57 percent of surveyed owners complained about there being “few or no” qualified job applicants for the vacancies they are trying to fill, a new all-time high. Moreover, “quality of labor” was once again the top-cited problem facing small businesses, and the “cost of labor” appears to be a growing challenge as well.
Sources: Econoday, U.S. DoL, NFIB, FRBSL