The most job openings ever (maybe it’s time to ask for a raise)

Certain economic data points stand out as noteworthy. In my last blog post, I highlighted rising inventory levels as potentially concerning. Counterbalancing this, I’ve taken note of the Bureau of Labor and Statistics’ (BLS) data on job openings. This is strikingly positive.

Specifically, the September Job Openings and Labor Turnover Survey (aka JOLTS – described briefly at the end of the post) shows a record high number of job openings and wage growth inflation.

jolts 2009-presentData: JOLTS chart from 2009-present

Source: Bureau of Labor and Statistics

Here is the JOLTS data since inception.

JOLTS data 2000-presentData: JOLTS 2000-present

Source: Bureau of Labor and Statistics

In the finance community, there’s been much focus on when the Fed will raise interest rates. The Federal Reserve board of governors has cited wage growth as an important factor. Well, wages look like they’re starting to grow. Further, increasing demand for workers (as evidenced by job postings) suggests workers can be pickier and demand further increases in pay. With more money going to employee’s paychecks, this should result in more money to spend leading to a virtuous cycle (more spending means companies do well leading to more hiring resulting in more wages driving further consumption).

Indeed, wages seem to be accelerating. The data are apparent in both the BLS employment data and in wage growth as tracked by the Federal Reserve Bank of Atlanta. Admittedly wage growth still appears tepid in the context of longer history, but wage inflation gathers momentum once it starts, and it appears the seeds have been planted.


Atlanta wage growth tracker 2009-presentData: annual year-over-year wage growth

Source: Federal Reserve Bank of Atlanta

For a longer term perspective, here is a chart of year-over-year wage growth from 2007-present. This data uses hourly earnings (reported monthly in the BLS’ Jobs report).

BLS wage growth yoy 2007-presentData: Hourly earnings year-over-year growth, 2007-present

Source: Bureau of Labor and Statistics

The mix of extremely good data (vis-a-vis the JOLTS data I’m mentioning here) alongside concerning points makes it challenging to arrive at a clear picture of where the economy is headed. That’s usually the case. The economy is a massive, complex beast that doesn’t lend itself to easy explanations. When data points do align to form a cohesive picture, it’s usually too late to forecast a trend change (by that time, the change has happened). As Yogi Berra once said, “It’s tough to make predictions, especially about the future.”

In totality, while I see more things that concern me rather than instill confidence, I am not dogmatically pessimistic. Data such as this is a key reason why.

 

There are alternate (less positive) interpretations of the JOLTS data. ECRI believes (or at least contemplates the possibility) that job posters have limited appetite to actually fill positions. They assert employers would hire a perfect candidate, but don’t really need to fill many of the positions listed. ECRI also claims that wage inflation data may be deceptive. Mathematically wages are calculated as total pay divided by total hours worked. If total pay declines but total hours worked declines faster, mathematically this shows wage inflation. For emphasis, I do not subscribe to ECRI’s claims. Still, I respect ECRI and their work, and include their ideas for the sake of considering other points of view.

Background on the JOLTS data: Starting in 2000, the BLS began the JOLT as a way to show unmet demand in the labor market by looking at job openings, hires and separations. Data is compiled monthly from a sample of 16,000 non-farm establishments (out of a universe of 9.1 million) that span across region, sector, size and ownership. Samples are randomized and rolled in and out of the panel on a 24 month rotation.

 

Sources: Job Openings and Labor Market Turnover Summary (Bureau of Labor and Statistics); Job Openings and Labor Market Turnover Summary background (Bureau of Labor and Statistics); The case of wage inflation deception (Economic Cycle Research Institute); Pursuing the Purple Squirrel (Economic Cycle Research Institute)

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