WHAT IT MEANS:
- INDICATOR: July Job Openings, Hires and Quits
- KEY DATA: Openings: +430,000; Hires: -199,000; Quits: -43,000
- IN A NUTSHELL: “With openings at record highs but hiring slowing, businesses are falling further behind on meeting their staffing needs.”
It’s tough being an HR executive these days. On one side you have everyone saying they need more employees while on the other side you have workers hesitant to move and CFOs who don’t want to pay more.
So what do you do?
The Bureau of Labor Statistics reported that open requisitions for positions soared to a record high in July as companies in just about every industry had trouble finding new employees. Only the construction and arts and entertainment industries posted fewer openings.
As has been the case for quite some time, the lack of workers is spread across skill levels.
While professional and business services had the highest rate of openings, accommodation and food services came in second.
Even with jobs openings growing by leaps and bounds, firms have not been able to find suitable workers at the wages they want to pay. Indeed, the rate of hiring declined. Part of the problem is that workers are just not leaving their jobs.
The quit rate is still very low as employees still are willing to stay with the devil they know than the devil they don’t know.
But that is likely to change and when it does, openings could spike even further.
MARKETS AND FED POLICY IMPLICATIONS:
How long businesses can make due with so many opening positions is something I just cannot figure out. I would have thought that by now, firms would have capitulated and started to attract workers by paying more. But they haven’t.
As the U.S. economy continues to expand, firms will have to find even more workers to meet the growing demand.
With the unemployment rate pretty much at full employment and with the underemployed not meeting the skill, age or required salary profiles, there are not a lot of people out there to attract anyway.
Normally, that sets off a bidding war, but we are not in normal times. Firms seem to be willing to go without and pray that productivity will save the day – or whatever has to be saved. But productivity has been lagging and as I have argued before, that may be because workers have learned that worker harder doesn’t lead to more income, so they just don’t work harder.
In other words, firms are in a trap. They need to raise wages to attract workers, especially from other firms, but they are unwilling to do that. They hope to get more fro their employees but just providing a job doesn’t have the same impact now as it did five years ago.
So, I will repeat my oft-repeated refrain: Wages need to rise if businesses are to produce more, households can buy more and growth can accelerate.
Until that happens, we will remain in this moderate growth cycle and business leaders will continue to complain about the less than stellar economy. The Fed watches this report, known as JOLTS, carefully. The members are aware that the only way the current conditions don’t eventually lead to rapid wage growth and a rebound in inflation is if the economy slows.
So, they can wait for the inevitable and raise rates then or assume the inevitable will occur and raise rates now.
Next week’s FOMC meeting cannot come soon enough as we are all suffering Fed Fatigue.
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