Tags: jobs | small business | openings | workers

Small-Business Owners Struggle to Find Workers

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Tuesday, 08 January 2019 03:24 PM Current | Bio | Archive

INDICATOR: November Job Openings and Layoffs and December Small Business Optimism

KEY DATA: Openings: -243,000; Layoffs: +8,000; Quits: -112,000/ NFIB Optimism: -0.4 point

IN A NUTSHELL: “Even though job openings are declining, they still are high and the inability to find workers remains the biggest concern of small business owners.”

WHAT IT MEANS: That the labor market is solid was driven home by the huge December jobs report. Lately, though, job openings have been declining. Indeed, they did so again in November. Given the huge December payroll increase, we will likely see another drop when the December numbers are released. Still, there are fewer people unemployed than there are job openings, so it is not as if we are in any danger of suddenly finding the labor market softening. It is not. Interestingly, the number of people willingly leaving their jobs fell. These data bounce around, but normally you would expect job-hopping to accelerate when the market is tight. The quit rate, which is the ratio of the number of quits to total employment, remained constant and at a relatively high level.

Small business optimism remained extremely high in December. The National Federation of Independent Business’ Index did ease back, but only minimally. The details of the report, though, do indicate some concern about the economy. The percentage of respondents who think the economy will improve, who think now is a good time to expand or invest or who think earnings will improve fell fairly sharply. The lack of available workers is weighing heavily on owners and while they are still trying to hire more employees, job openings continue to rise.

MARKETS AND FED POLICY IMPLICATIONS: Typically, small business hiring has led the way, but that trend is fading. While that lack of workers has not caused business optimism to decline sharply, it is becoming problematic for earnings. Small businesses are either incapable or unwilling to match the higher wages being paid by larger firms and that is reducing their pool of potential workers. And those they hire are less likely to be good matches, which reduces productivity. The longer the expansion goes, the lower the unemployment rate will fall, making it even more difficult for smaller firms to get the workers they need to meet the growing demand. Ultimately, they will have to decide whether to raise wages faster, invest more or reduce growth. They cannot have it all if they don’t have the workers. That said, as long as this sector holds out on raising wages, and they appear to be doing that, wage gains will remain less than expected and job growth will likely moderate. Meanwhile, the markets are focusing on the prospects of a trade agreement. Once again, we have rumors that progress is being made in the talks with China. We have heard that before, only to find out it was an illusion. But the reaction of investors to those rumors makes it clear that a full out trade war would crater the markets as investors know that the U.S., Chinese and world economies could not survive the battles. Let’s hope there is progress this time. Even if the agreement turns out to be more puff than pastry, which is what I expect, getting this issue off the table is critical.

Joel L. Naroff is the president and founder of Naroff Economic Advisors, a strategic economic consulting firm.

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Even though job openings are declining, they still are high and the inability to find workers remains the biggest concern of small business owners.
jobs, small business, openings, workers
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2019-24-08
Tuesday, 08 January 2019 03:24 PM
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