U.S. Job Openings in June Fall a Bit From Record Highs

Job openings registered at 5.25 million in June, down from 5.36 million in May.
JOE RAEDLE/GETTY IMAGES

The number of job openings in the U.S. fell slightly in June but remained at a level suggesting strong demand for workers.

Job openings slipped to 5.25 million in June, down from a record 5.36 million in May, according to the Labor Department’s Job Openings and Labor Turnover Survey, known as Jolts.

Hires climbed to the highest level of the year at 5.12 million and the number of Americans voluntarily quitting their jobs climbed to 2.75 million from 2.73 million the prior month. The number of voluntary quits tends to rise when people are confident about job prospects.

Another 1.79 million people were laid off or discharged in June, down from 1.66 million in May.

“In other words, labor demand is still rising very rapidly, and is hugely elevated relative to the unemployment rate,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, said in a note to clients.

The main jobs report, out earlier this month, showed the unemployment rate at 5.3% in July and June. Nonfarm payrolls rose a seasonally adjusted 215,000 in July and 231,000 the prior month. The initial employment situation report only shows net job gains or losses, while the Jolts report offers additional details on the total number of hires, openings and separations.

Both reports are closely followed by officials at the Federal Reserve. Chairwoman Janet Yellen has said the rate of voluntary quitting is a key gauge of workers’ confidence in the economy. When the economy is stronger, workers are more likely to quit their jobs because it’s easier to find something elsewhere.

In recent months, the number of quits has held fairly steady and a gap between job openings and hires has opened, a mismatch that suggests employers haven’t been able to find workers with the desired skills at the salary on offer.

“While growth in job openings has cooled off in recent months, the key takeaway should be that the underlying health of the labor market continues to improve,” said Jeremy Schwartz, an associate at Credit Suisse. “The ratio of vacancies to unemployed workers continues to rise and is near precrisis peaks.”

Still, businesses haven’t responded with significantly higher wages. That may be because there’s still a ready pool of workers.

Despite 58 consecutive months of rising payrolls, 8.3 million workers were looking for a job but couldn’t find one in July, while others had given up looking or were stuck in part-time jobs but would have preferred a full-time position.

And the share of Americans participating in the labor force, at 62.6% in July, matched the lowest reading since 1977, a possible sign there’s a mismatch between job openings and job seekers.

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Fed Chairwoman Janet Yellen remains troubled by stubbornly high levels of slack.
PAUL J. RICHARDS/AFP/GETTY IMAGES

Friday’s jobs report revealed that the unrounded overall unemployment rate, at 5.26%, has finally dropped below its prerecession average, a point underscored in a blog post by Jason Furman, chairman of the White House Council of Economic Advisers.

So we’re now fully recovered from the recession, right? The labor market is cranking and the Federal Reserve is sure to pull the trigger on higher rates in September to keep the economy from overheating, right?

Well, not quite. Look below the topline unemployment rate and the picture becomes murkier. Yes, slack in the overall labor market has been absorbed. But as a chart below (created by Mr. Furman’s shop) points out, there is still plenty of labor market slack among certain groups. The share of long-term unemployed workers is still 34% higher than it was before the recession, although it’s come down noticeably.

And the much-scrutinized “U-6” unemployment rate, a broader indicator that includes those stuck in part-time jobs and discouraged workers, is still 14% above where it stood. The unemployment rates for women and Hispanics are also slightly higher than they were before the recession, Mr. Furman notes.

There are two ways to look at this. The optimistic view would note that while some measures of labor market slack remain high, they’re all moving in the right direction. And since the recession was so severe, it’s only normal that some more vulnerable groups in the labor market should take longer to recover. A more pessimistic observer would argue it’s hard to make the case that the labor market is fully healed when it’s still so hard for those who have been unemployed six months or more to get a job.

So where does the Fed fall in all this? It’s hard to say for sure. While economists generally agree that Friday’s report puts the central bank firmly on track to raise rates next month, it’s clear that Fed Chairwoman Janet Yellen remains troubled by stubbornly high levels of slack.

“The lower level of the unemployment rate today probably does not fully capture the extent of slack remaining in the labor market–in other words, how far away we are from a full-employment economy,” she said in a speech last month in Cleveland.

Nothing in today’s data is likely to lead her to change that assessment.

Related reading:

Jobs Report: U.S. Businesses Add 215,000 Jobs

July Jobs Report: Everything You Need to Know

The July Jobs Report in 12 Charts

July Jobs Report – The Numbers

Economists React to the July Jobs Report: ‘Will Keep the Fed in Play in September’

Hilsenrath Analysis: July Job Numbers Keep Fed Rate Hike on Track

 

Economists React to the July Jobs Report: ‘Will Keep the Fed in Play in September’

 ”A very high level of job gains are still centered in low-wage industries–health, restaurants and retail,” says Steve Blitz of ITG Investment Research.
JUSTIN SULLIVAN/GETTY IMAGES

U.S. employers added 215,000 new jobs in July holding the unemployment rate at 5.3%. Employers have now boosted hiring for 58 straight months and the unemployment rate is where the Federal Reserve expects it to be at the end of the year. The past few months have brought a steady rise in employment and a steady decrease in the unemployment rate but other indicators suggest there’s still ground to be made up in the labor market. Labor-force participation is stuck at 62.6% for the second straight month, the lowest level in almost four decades. And there’s no sign of a breakout in wages. Average hourly earnings have risen 2.1% over the year, a modest pace that’s on par with the postrecession norm. The big question now is whether this report is good enough to prompt Fed officials to raise rates in September or whether they will want to wait a little longer. Here’s what economists had to say about the July jobs report.

“Altogether, we view this report as easily clearing the hurdle needed to keep the Fed on track for a September rate hike, and as such, we continue to look for the first hike in September. Of course, there is still one more jobs report before September that, combined with lingering uncertainty about developments in the external environment, could push the Fed to delay the rate hike cycle; but, we view the bar for not moving as much higher now.” –Rob Martin, Barclays

“The report likely won’t change minds on the Fed either way, but it does represent a modest incremental tightening in labor market conditions; the trend in employment continues to rise faster than the underlying rate of growth of the labor force, keeping downward pressure on the unemployment rate. The unchanged July rate doesn’t matter; the trend is still falling and in all likelihood it will dip to 5.2%, the top of the Fed’s Nairu [full employment] range, in August. Remember the Federal Open Markets Committee statement last week said policy makers want to see ‘some further improvement’ in the labor market before they hike; this report qualifies, in our view, with broad-based employment gains. Only mining is shedding jobs, but the rate of decline has slowed sharply and the July dip was only 5,000.” –Ian Shepherdson, Pantheon Macroeconomics

Inside the Numbers: WSJ’s Justin Lahart analyzes the July employment report and explains why the numbers, despite coming in as expected, could give the Fed pause when it considers interest rate increases. 

“A largely ‘as expected’ report in terms of payrolls, the unemployment rate, and average hourly earnings, with the workweek ticking up instead of remaining unchanged as most had expected. With the underlying trend of job growth remaining solid, there is nothing in this report to dissuade the FOMC from pulling the trigger on Sept. 16 if that is indeed its preference at the moment.” – Joshua Shapiro, MFR, Inc.

“This report easily meets the definition of ‘some’ further improvement in the labor market and further lowers the bar for the notoriously upward revision prone August payrolls to meet this definition (August payrolls have been upwardly revised by 74,000 on average over the last six years, which means 137,000 on the initial release could be viewed as entirely consistent with the trend in payrolls thus far in 2015 but any revisions would come after the September FOMC meeting). We see a rate hike on Sept. 17 as very likely and think the remaining data releases would have to be quite weak to delay liftoff until December.” –John Ryding and Conrad DeQuadros, RDQ Economics

“While the headline job gain was a bit smaller than expected, this is another solid report that, in our view, meets the criteria for “some further improvement” in labor market conditions and thus will keep the Fed in play in September.  The numbers are not strong enough to end the debate, but we remain comfortable with our view that they will take action at that time.” –Michelle Girard, RBS Securities

“The July jobs report came in about as we and the consensus expected.  There is nothing in the report that should dissuade the FOMC from their initial rate increase in September.  The net 215,000 nonfarm jobs created in July brings the year-to-date job creation total to 1.48 million, and the three-month average monthly gain to 235,000.  With only one more employment report before the September FOMC meeting, it would probably take a sharp slowdown in job growth in August, perhaps well below 100,000 jobs or even negative job growth for the FOMC to delay their initial rate hike until December.  Thankfully, there is little to suggest that August job growth will suddenly stall.” –Scott Anderson, Bank of the West

“What the July payroll data mean for the FOMC is that efforts to stall [a] first move in September just got that much harder. The economy, through hiring, shows no signs of rapid acceleration, in fact the pace of job growth is slower this year than last. A very high level of job gains are still centered in low-wage industries–health, restaurants and retail. They add to about 45% of the July gains. And we can [add] to this grouping the 14,400 increase in transportation and warehousing–mostly support activities, couriers, messengers, and storage. Perhaps we can call it the Amazon economy. On the other hand, the more important one, we do see in the data improved levels of hiring tied to residential real estate, in construction and finance.” –Steve Blitz, ITG Investment Research

“The 215,000 rise in July payroll jobs, combined with a combined 14,000 upward revisions to job growth in May and June, is another strong labor market report. This will likely give the FOMC the needed ‘confidence’ to begin raising the Fed funds rate by 25 basis points at their Sept. 16-17 meeting, as reflected in our June baseline interest rate forecast. A similar report for August (released on Sept. 4) would likely be enough to ‘seal the deal’ for a mid-September rate hike.” – Gus Faucher, PNC

Related reading:

Jobs Report: U.S. Businesses Add 215,000 Jobs

July Jobs Report: Everything You Need to Know

The July Jobs Report in 12 Charts

July Jobs Report – The Numbers

Hilsenrath Analysis: July Job Numbers Keep Fed Rate Hike on Track

The July Jobs Report in 12 Charts

The U.S. economy added 215,000 jobs in July, continuing a steady expansion. Friday’s report from the Labor Department showed few changes from the prior month on a range of measures, including the unemployment rate, at 5.3%, and the labor-force participation rate.

The economy has added around 2.9 million jobs over the past 12 months. That’s down slightly from earlier this year, when the 12-month paced surpassed three million, but it is still well ahead of the 2.5 million jobs added for the year ended July 2014.

Job growth over the past three months reached its highest level since February, with an average 235,000 jobs added per month.

Meanwhile, the unemployed rate held steady at 5.3%. A broader gauge of underemployment, which includes workers who have part-time positions but say they would like full-time jobs, ticked down to 10.4%.

The economy is very different for college graduates, who face only a 2.6% unemployment rate, compared with 5.5% for those who have no education beyond high school and 8.3% for those who did not complete high school.

The share of Americans in the labor force—that is, those who are working or looking for work, has remained at the lowest level since 1977. The share of Americans with jobs has risen slightly in the past five years, but remains lower than before the recession.

One reason for the decline in labor-force participation has been the aging of the U.S. population and the retirement of baby boomers. When looking only at workers between ages 25 and 54, labor-force participation is at 80.7%. That’s still down from before the recession, as is the share of workers with jobs.

The report provided few signs of accelerating wage inflation. Average weekly earnings rose 2.4% from a year earlier, but that mostly reflected slightly more hours worked in July. Hourly wages were 2.1% higher than a year earlier.

The vast majority of jobs added since the recession officially ended in June 2009 have been full-time positions. More than 8 million more full-time jobs have been added.

Still, more than 8 million full-time jobs were lost during the recession, which began in December 2007. The U.S. has nearly recovered all of those lost full-time jobs.

Half of all unemployed workers have been without work for 11.3 weeks.

The share of the unemployed who have been without work for more than half a year has been gradually decreasing. But even five years since the recession officially ended, today’s share of the long-term jobless is higher than any of the previous three recessions.

The level of workers who are considered long-term unemployed is still higher than it was in December 2007, when the recession ended, but it has been coming down steadily.

 

Related reading:

Jobs Report: U.S. Businesses Add 215,000 Jobs

July Jobs Report: Everything You Need to Know

July Jobs Report – The Numbers

Economists React to the July Jobs Report: ‘Will Keep the Fed in Play in September’

Hilsenrath Analysis: July Job Numbers Keep Fed Rate Hike on Track

So the Job Market Is Strong, But There’s Still Plenty of Slack