Job Openings Hit a New Record in June, Small-Business Optimism Rebounded in July

By Robert Hughes

A record 6.16 million positions were open at the end of June, according to the Bureau of Labor Statistics, up from 5.70 million at the end of May. Private-sector employers had a record 5.59 million vacancies to fill, up from 5.17 million in May. For the total economy and the private sector, the openings rates, openings divided by the sum of employment and openings, equaled their previous records, hitting 4.0 and 4.3 percent, respectively.

The industries with the highest openings were business and professional services (1.21 million and an opening rate of 5.5 percent), health care (1.14 million and 5.5 percent), and leisure and hospitality (0.82 million and 4.9 percent). The government sector had 0.58 million openings and an openings rate of 2.5 percent.

A second key measure for the labor market from today’s report is the number and percentage of quits. A rising or high level of quits suggests employees are finding new, and likely higher-paying, jobs or they have enough confidence in the labor market to quit without new jobs in hand but with the belief that they will find new ones quickly. Quits fell slightly in June to 3.13 million, down from 3.21 million in May. The overall quits rate ticked down to 2.1 percent from 2.2 percent in May. For the private sector, quits fell to 2.97 million from 3.04 million, pushing the quits rate to 2.4 percent from 2.5 percent in the prior month. Despite the slight declines, quits and quits rates for the overall economy and the private sector are equal to or above the peaks seen prior to the last recession.

These data confirm the broad array of reports that suggest the labor market remains robust and should continue to support economic growth.

The National Federation of Independent Business reported that small-business optimism rose in July. The results of the latest survey of its membership show the optimism index, a composite of 10 survey indicators, rose to 105.2 in July, up from 103.6 in June. The optimism index surged to a 12-year high in December 2016 following the presidential election but gave back some of the gain over the past few months. The July gain was the sharpest increase since the December surge.

The component indicators making the largest positive contributions to the optimism index were net percentage of respondents with current job openings, net percentage expecting higher real sales, net percentage expecting the economy to improve, and net percentage planning to increase employment. Two indicators made negative contributions: net percentage planning to make capital outlays, and net percentage expecting credit conditions to ease.

Small-business optimism is near the top of its historical range and may not be sustainable, particularly because much of the rebound came after the election and a growing number of political analysts believe little significant legislation is likely to get passed in the near future. Still, a reasonably high level of confidence should be justified by economic conditions, and that should help sustain the virtuous cycle of hiring and economic growth.

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Robert Hughes

Robert Hughes joined AIER in 2013 following more than 25 years in economic and financial markets research on Wall Street. Bob was formerly the head of Global Equity Strategy for Brown Brothers Harriman, where he developed equity investment strategy combining top-down macro analysis with bottom-up fundamentals. Prior to BBH, Bob was a Senior Equity Strategist for State Street Global Markets, Senior Economic Strategist with Prudential Equity Group and Senior Economist and Financial Markets Analyst for Citicorp Investment Services. Bob has a MA in economics from Fordham University and a BS in business from Lehigh University.