Labor Market Indicators Remain Upbeat

By Robert Hughes

Newly updated indicators for the labor market suggest a positive outlook for the economy. The Job Openings and Labor Turnover Survey for November shows the number of open positions in the private sector rose by 21,000 to 4.97 million. Adding in a 48,000 increase in the number of open government jobs, and the total number of open positions in the economy stands at 5.52 million, the 11th month above 5.5 million in the past 20 months.

The number of employees quitting their job rose to 3.06 million, the highest on record. That puts the quit rate at 2.1 percent, unchanged from the prior month. The Accommodation and Food Service sector had the highest quit rate, at 4.5 percent.

Initial claims for unemployment insurance remain near record lows when measured as a share of employment. That, combined with indicators like the ones described above, suggest the labor market remains tight. A recent survey from the National Federation of independent Business adds additional support for this assessment. According to the NFIB, the percentage of respondents saying they have open positions that they cannot fill, as well as  the percentage of respondents who say they plan on increasing employment, both remain at generally high levels.

The ongoing tightness in the labor market, combined with steady demand for workers, has helped put upward pressure on wages.  In the December Employment Situation report released last Friday, average hourly earnings rose at a 2.9 percent pace from a year ago, the fastest pace since 2009. Faster wage and income growth should boost consumer income overall and provide a basis for gains in consumer spending.

The risk, however, is that faster wages also put upward pressure on consumer prices, thereby prompting the Fed to raise interest rates more aggressively.

 

 

 

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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.