American workers’ wage bargaining power continues to build momentum this year: August marked the sixth consecutive month in which there were more job openings than Americans looking for work. A few points here courtesy of the Job Opening and Labor Turnover Survey out today:
- Job openings increased to 7.14 million in August (latest available data), up 18.1% y/y. That represents the greatest number of job openings ever recorded since the series started in December 2000. In fact, it never cleared the seven million threshold until July at 7.08 million. Of course, the labor market has grown over the past two decades, but these figures are still notable and show strong interest in hiring on behalf of employers.
- The wrinkle to employers’ high level of interest in adding to their payrolls is that there were just 6.23 million unemployed workers in August. That means there were 902K more job openings than individuals looking for them. While the number of job openings has been growing, the latest data for unemployed workers shows the number of unemployed workers has been shrinking, to just 5.96 million last month.
- Other than from this past March through August, there have been no other months in which job openings have exceeded unemployed workers dating back to the beginning of the JOLTS data at the end of 2000. The only other times the number of job openings got close to the number of unemployed people was early in the dot-com crash and just before the Great Recession. There were just 638K more unemployed people than job openings in January 2001 and 2.03 million more in April 2007; those were the lowest figures for those timeframes other than the past couple of years.
Bottom line, the labor market is in unprecedented territory with far more job openings than Americans looking for work. This dynamic makes it more difficult for employers to find the right employees to fill positions, but it could draw more people back into the labor force and also allows workers to be more selective when choosing which job to accept. This in turn should help spur more wage growth above the 2.8% y/y rate registered last month.
That’s our major takeaway from the latest edition of JOLTS, but there are two other important datapoints within the report worth noting:
- Hires: 5.78 million Americans started new jobs in August, up 5.0% y/y and the most on record. Given the growth in the labor force since the start of the series, we’ll look for this figure to keep climbing in the coming months.
Despite a record level of hires and job openings, job openings still exceed hires by 1.35 million. That’s a huge gap given that hires always bested job openings prior to August 2014. Aside from fewer people looking for jobs than positions available, the disparity between hires and job openings reflects employers’ ongoing difficulty finding qualified workers as highlighted in the Fed’s Beige Books.
- Quits: Our “Take this job and shove it” indicator, or quits to total separations, dropped to 62.7% from a record high of 64.5% in July. This fall reflects a slight decline in the number of people who quit their jobs in August, down 0.9% m/m to 3.58 million. Nevertheless, quits are still up 12.7% y/y, showing a very healthy level of workforce mobility and (if the worker isn’t immediately moving to another job) confidence in the US economy.
All in all, the labor market continues to tighten and favor workers’ ability to demand higher wages. That said, employers’ difficulty finding qualified workers could start to hold back economic growth as they struggle to expand their businesses. More Americans re-joining the workforce could help, as could lowering unnecessary educational requirements and boosting training programs. Going forward we will especially keep a close eye on wage growth, which should accelerate at a faster clip.
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