Officials searching for evidence of normalization in the US jobs market were left disappointed by key figures released on Tuesday.
Job openings actually rose 200,000 in July, to 11.239 million, versus just over 11 million on the last business day of June. Consensus expected 10.38 million from the headline JOLTS print.
The figures were an unwelcome reminder that the labor market remains a funhouse mirror — an oddity distorted beyond all recognition by an acute, and apparently intractable, mismatch between open positions and workers willing to fill them. Hires fell from June, leaving the gap near record wides (figure below).
Hires have fallen for five straight months. In the context of the Fed’s efforts to cool the labor market, you could construe that as welcome, if openings were falling simultaneously. And they were, until July. Last month’s uptick stood in stark contrast to pervasive reports of corporate hiring freezes, layoffs and initiatives aimed at reassessing staffing needs in the presence of a decelerating economy.
As a reminder that no one needs: The “soft landing” narrative, to the extent officials are still brave enough to push it, depends very much on the controversial contention that the Fed can effectively render millions of job vacancies superfluous, thereby reducing the disparity with available labor. That disparity is blamed for red-hot pay growth which threatens to embed a wage-price spiral in the economy.
Critics of that view will see Tuesday’s data as evidence to support their skepticism. They argue that closing the gap is a matter of improving matching efficiency, not moderating demand. Because matching efficiency is the purview of fiscal initiatives, not monetary policy, many economists suggest the Fed’s incessant allusions to the JOLTS report are a red herring — that the Committee will ultimately be compelled to cool wage growth (and thereby inflation) the old fashioned way. That is, by engineering a rise in the unemployment rate.
Although the quit rate retreated to a 14-month low in July, it still stood at 2.7%, well above any level witnessed prior to the pandemic (figure below).
Around 4.18 million people quit a job in July. That was the fewest since October, but “fewest” is an extremely relative term. In data going back two decades, there’s no precedent for quits above four million. Layoffs remained near record lows.
833,000 people quit a leisure and hospitality job last month. July marked the 13th consecutive month during which at least 800,000 people quit a job in the sector. That churn is part and parcel of elevated wages for workers on the low-end of the pay scale. 755,000 of last month’s leisure and hospitality quits came in accommodation and food services. If there’s a silver lining, it’s that this dynamic is at least ensuring the lowest-paid workers in the economy are seeing wage gains commensurate with inflation, if only barely.
Although some observers will doubtlessly suggest the data offered “evidence of improvement,” you’d have to squint to see it. Literally.
On Sunday afternoon, I drove 52 miles to the nearest town with a Walmart. I needed a cartload of simple things which can’t be purchased on the island in anything like “bulk” (for new readers, I really do live on an island — that’s not a shtick). I was unable to purchase them at the first Walmart I visited. There was no one (not a single person) operating a standard checkout. As such, the line for the self-checkout was backed up into the frozen foods section.
So, I drove 15.2 miles (according to Google) to the next nearest Walmart. That too was unsuccessful for the same reason, the only difference being that because the stores were laid out differently, people in line for the self-checkout were standing amongst racks of cheap beach apparel as opposed to ice cream. As I walked out, empty-handed, I noticed a sign on the sliding doors. It read: “This location is out of bags.”
Ultimately, I found a Kroger.
So far, this economy – so far – feels different. It doesn’t feel like it’s going to lead to a recession. We know what Powell said. Whatever this thing is, the Fed will smite it.
Don’t know what’s on tap for the next month or the next six months. But might it be the US economy just has a spot of gas that a good belch will resolve? The jobs stats so far this year make me wonder.
Here’s something I am curious about – what is the geographic breakdown of the unfilled job openings? In the context of the oft-cited skills gap.
Specifically, how many unfilled job openings are in areas where many US and foreign companies moved to in order to pay lower taxes? Lower state and local taxes look like a lay-up to the top execs, but those lower taxes often come with the cost of terrible educational systems. Companies moving to MAGA-land may find it difficult to find people not only with advanced skills, but even more basic skills such as the ability to understand written instructions. (Or pass a drug test, for that matter.)
A good example came via the recent WSJ story about Pella’s hiring woes. Well before that we had the opportunity to speak with the owners of a consumer goods producer located in the rural area where the founders grew up. In order to stay competitive, they had to automate more and more. The problem was that this required a more skilled labor force which was not available in the area. They then found that in order to attract employees from elsewhere with the necessary skills, they had to fund and build a charter school and a health care clinic. So much for lower taxes.
Not sure how much this explains those sticky numbers. And outside of the drug test issue, I don’t imagine that this was a factor explaining Dr. H’s experience at the “nearby” WalMarts.
I’m just happy JOLTS cooperated. I was very close to wasting that Walmart anecdote on a third Sunday week-ahead preview article, but I said to myself, “No. Save it. You’ll run out of copy at the end of the JOLTS article and you can insert it there.”
I believe that’s a good point, Derek, and a worthy question about job distribution. The US economic (and employment) landscape is dynamic, and it changes every day. Where are these jobs? Are they in cities? In travel destinations? In restaurants? In tech?
Thanks also for sharing the WSJ story about Pella as well. Very interesting, the background about the rural area where the founders were raised and the needs for skilled labor and automation that they encountered. Every city and town experiences levels of innovation, expansion, growth, population shifts, etcetera.
One thing I really do not at all understand: Why are so many companies moving to Miami? The reality of global warming is evolving more quickly this year than any other year previous. The Greenland ice sheet today is melting, and the melt is accelerating dramatically this year. If it persists at this rate, Miami will (in ten or 15 years) have constant seawater in its streets – not just when the tide comes in.
Sounds like the people making the ‘move to Miami’ decision also aced high school Basket Weaving and Rug Design.
1) I’m just hoping that many people trapped in the MAGA red states are moving to purple states with similar job opportunities…I’d sure wish the Dems would siphon off some their Electoral Industrial Complex political donations to support people actually having better lives outside of MAGA land…
…PS … sliver lining is that perhaps people aren’t feeling compelled to work at Walmart these days and suffer all the abuse and indignities that entails…
Great point derek.
Although the Degree in basket weaving may seem fairly senseless to most, cognition due to the intricacy and an assumption that the Weaver learns directions and knows how to read, due to the Degree, seems that they would be capable of learning many marketable skills.
Some people don’t hit their strides till a little later than 22 years old.
New York City rents have gone crazy and it appears the young people want to be living in places that have a sense of modernity. Yes we have made America’s hinterland scary again.
If we had a sane immigration policy in place now even the Republicans would be clamoring to let more workers in.
Now there’s an interesting concept; an immigration policy that solves worker shortages, re-industrializes the heartland, grows GDP, and helps slow inflation. Can any political system today make that happen. I’m not sure anyone knows where to start, maybe more granular information behind the big concepts like workforce participation rate. I’m curious if anyone knows of any interesting AI applications in this area.
@ChicagoDave I am a former Chicagoan, nearly lifelong midwesterner (partially due to the San Diego commute of the late 2000s and due to climate change), and wonder the exact same thing about people flocking to Miami and other places that will be devastated by climate change.
Hope it was a nice day for a drive…. Otherwise, have you heard of online ordering with home delivery? Just teasing- but you do live an isolated life on an island….
At my local City Market (a Kroger subsidiary) the grocery store manager has told me I am one of his most capable “self checkers”. It is almost funny, but a shortage of human checkers has “forced” me to memorize the SKU for my frequently repeated fruit/veggie purchases that don’t have a bar code sticker on them.
I even know how to trick the system when I purchase more than 25 items, so that I can avoid the required human override that is normally necessary to allow continued self scanning!