US job open­ings at record high; mar­ket is tight­en­ing

Pro­duc­tiv­ity rises in Q2; la­bor costs soft

Kuwait Times - - BUSINESS -

US job open­ings jumped to a record high in June, out­pac­ing hir­ing, the lat­est in­di­ca­tion that com­pa­nies are hav­ing trou­ble find­ing qual­i­fied work­ers.

The monthly Job Open­ings and La­bor Turnover Sur­vey, or JOLTS, re­leased by the La­bor Depart­ment on Tues­day also un­der­scored la­bor mar­ket strength that will likely en­cour­age the Fed­eral Re­serve to con­tinue tight­en­ing mon­e­tary pol­icy de­spite be­nign in­fla­tion and con­cerns about con­sumer spend­ing.

“Com­pa­nies are run­ning out of work­ers to hire to do the job or even train to do the work, and this is a tick­ing time bomb for eco­nomic growth,” said Chris Rup­key, chief econ­o­mist at MUFG in New York. “To­day’s JOLTS data bring a Septem­ber meet­ing bal­ance sheet un­wind an­nounce­ment a lit­tle closer to re­al­ity.” JOLTS, is one of the job mar­ket met­rics on Fed Chair Janet Yellen’s so-called dash­board. Economists ex­pect the US cen­tral bank will an­nounce a plan to start re­duc­ing its $4.2 tril­lion port­fo­lio of Trea­sury bonds and mort­gage-backed se­cu­ri­ties at its next pol­icy meet­ing in Septem­ber.

Tame in­fla­tion and worries about con­sumer spend­ing amid tepid wage growth and fal­ter­ing mo­tor ve­hi­cle sales, how­ever, sug­gest the Fed will de­lay rais­ing in­ter­est rates again un­til De­cem­ber. It has in­creased bor­row­ing costs twice this year.

Job open­ings, a mea­sure of la­bor de­mand, in­creased by 461,000 to a sea­son­ally ad­justed 6.2 mil­lion. That was the high­est level since the data se­ries started in De­cem­ber 2000 and pushed the job open­ings rate up two-tenths of a per­cent­age point to a near one-year high of 4.0 per­cent.

The monthly in­crease in job open­ings was the largest since July 2015. The surge in job open­ings was al­most broad-based. There were 179,000 ad­di­tional va­can­cies in the pro­fes­sional and busi­ness ser­vices in­dus­tries. The health care and so­cial as­sis­tance sec­tor had 125,000 more job open­ings and con­struc­tion com­pa­nies had an ad­di­tional 62,000 un­filled po­si­tions. In June, job open­ings were con­cen­trated in the Mid­west and West re­gions.

The ra­tio of job open­ings to un­em­ploy­ment hit a 16-year high. Hir­ing was lit­tle changed at 5.4 mil­lion in June, leav­ing the hir­ing rate steady at 3.7 per­cent. The gap be­tween job open­ings and hir­ing points to a skills mis­match, which was also cor­rob­o­rated by a sep­a­rate re­port on Tues­day from the Na­tional Fed­er­a­tion of In­de­pen­dent Busi­ness.

The NFIB sur­vey showed job open­ings at a 16-year high in July. Small busi­nesses cited a lack of skills as the main rea­son for the va­can­cies. Oth­ers also blamed “un­rea­son­able” wage ex­pec­ta­tions, at­ti­tude, ap­pear­ance as well as drug ad­dic­tion for dis­qual­i­fi­ca­tion of job seek­ers.

Economists are op­ti­mistic that tight­en­ing la­bor mar­ket con­di­tions will spur faster wage growth. An­nual wage growth has strug­gled to break above 2.5 per­cent, con­tribut­ing to in­fla­tion per­sis­tently run­ning be­low the Fed’s 2 per­cent tar­get.

“The JOLTS re­port con­tin­ues what has been a rea­son­ably strong run for the la­bor mar­ket data, and we ex­pect con­tin­ued im­prove­ment in the job mar­ket to keep up­ward pres­sure on wages,” said Daniel Sil­ver, an econ­o­mist at JPMor­gan in New York. Other de­tails of the JOLTS re­port were mixed. About 3.1 mil­lion Amer­i­cans vol­un­tar­ily quit their jobs in June, down from 3.2 mil­lion in May. As a re­sult, the quits rate, which the Fed looks at as a mea­sure of job mar­ket con­fi­dence, dipped to 2.1 per­cent from 2.2 per­cent in May.

Lay­offs rose 28,000 to 1.7 mil­lion in June, lift­ing the lay­offs rate one-tenth of a per­cent­age point to 1.2 per­cent.

Pro­duc­tiv­ity

US worker pro­duc­tiv­ity rose more than ex­pected in the sec­ond quar­ter as hours in­creased at their fastest pace in 1-1/2 years, keep­ing la­bor costs un­der con­trol. The La­bor Depart­ment said yes­ter­day that non­farm pro­duc­tiv­ity, which mea­sures hourly out­put per worker, in­creased at a 0.9 per­cent an­nu­al­ized rate in the April-June pe­riod. First-quar­ter pro­duc­tiv­ity was re­vised to show it edg­ing up at a 0.1 per­cent pace in­stead of be­ing un­changed as pre­vi­ously re­ported.

Com­pared to the sec­ond quar­ter of 2016, pro­duc­tiv­ity in­creased at a 1.2 per­cent rate, the strong­est per­for­mance in two years. Economists had fore­cast pro­duc­tiv­ity in­creas­ing at a 0.7 per­cent pace in the sec­ond quar­ter. With pro­duc­tiv­ity ris­ing, unit la­bor costs, the price of la­bor per sin­gle unit of out­put, in­creased at only a 0.6 per­cent pace in the sec­ond quar­ter af­ter jump­ing at a 5.4 per­cent rate in the Jan­uary-March pe­riod. Com­pared to the sec­ond quar­ter of 2016, unit la­bor costs fell at a 0.2 per­cent rate, point­ing to muted in­fla­tion. Com­ing on the heels of a re­cent mod­er­a­tion in price pres­sures, the re­treat in unit la­bor costs may worry Fed­eral Re­serve of­fi­cials as they con­tem­plate fur­ther mon­e­tary pol­icy tight­en­ing.

Prices for US Trea­suries were higher in mid­morn­ing trad­ing while US stocks were lower. The dol­lar gained against a bas­ket of cur­ren­cies.

The gov­ern­ment also re­vised pro­duc­tiv­ity data go­ing back to 2014, in line with re­cent re­vi­sions to gross do­mes­tic prod­uct fig­ures. Those re­vi­sions showed pro­duc­tiv­ity fall­ing 0.1 per­cent in 2016, the first drop since 1982. Pro­duc­tiv­ity in­creased at an av­er­age an­nual rate of 1.2 per­cent from 2007 to 2016, be­low its long-term rate of 2.1 per­cent from 1947 to 2016, in­di­cat­ing the econ­omy’s po­ten­tial rate of growth has de­clined.

Ane­mic pro­duc­tiv­ity is bad news for Pres­i­dent Don­ald Trump who has pledged to boost an­nual eco­nomic growth to 3.0 per­cent through tax cuts, in­fra­struc­ture spend­ing and a roll­back of reg­u­la­tion. “To reat­tain 3 per­cent real GDP growth with the de­mo­graph­ics the US is fac­ing, pro­duc­tiv­ity growth will have to ex­ceed its long-run av­er­age growth rate of 2.1 per­cent, and we are far short of at­tain­ing such a pace,” said John Ry­d­ing, chief econ­o­mist at RDQ Eco­nom­ics in New York. —Reuters

BOS­TON: Men work on a street in down­town Bos­ton. The US La­bor Depart­ment re­leased sec­ond quar­ter pro­duc­tiv­ity data yes­ter­day. —AP

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