Labor Market Glass Is Half Full
Following last Friday’s jobs report, new labor market indicators show some mixed results but the net take-away is that the labor market has good momentum and the U.S. economy is likely to continue creating jobs at a healthy pace over the next few months.
The Job Openings and Labor Turnover Survey (JOLTS) from the Bureau of Labor Statistics shows the number of job openings (unfilled positions) rose to 5.74 million in February, the fourth-highest level on record (data are available back to 2000). The number of employees quitting in February (a sign employees are getting new, presumably higher paying jobs, or have the confidence to quit before getting a new job) fell to 3.08 million following a surge to 3.19 million in January. Despite the fall, quits totaling 3.08 million is still the ninth-highest level since 2000.
A monthly survey by the National Federation of Independent Businesses (NFIB) shows strong readings for job openings, hiring plans, and compensation plans among its small-business members. The survey also shows that finding qualified workers is becoming more challenging for firms looking to hire.
The Conference Board’s Employment Trends Index is a composite of eight labor market indicators designed to measure activity in the U.S. labor market. The index rose to 131.43 in March, up from 131.09 in February. The index has increased 4.3 percent from March 2016. Gad Levanon, Chief Economist, North America for The Conference Board noted in the press release that “The Employment Trends Index continued to expand in March, suggesting that solid job growth will continue through the spring.” He further noted, “The surprisingly weak job growth in March is mostly noise in an otherwise healthy and tight labor market,” sentiments similar to the comments I made last Friday following the jobs report.
Finally, the Labor Market Conditions Index (LMCI) from the Federal Reserve ticked down slightly in March to a reading of 0.4. However, a level above zero still suggests positive momentum for the labor market overall.
The bottom line is that the labor market is healthy and likely to be the foundation for continued economic expansion in the months ahead, despite some monthly volatility in the data. That conclusion is consistent with the results of AIER’s business-cycle Leaders Index that held at a healthy 75 reading in February (readings above 50 suggest continued economic expansion with a low probability of recession in the months ahead). The March results for our Leaders Index will be released later this week.
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.
