The Economy

The U.S. Jobs Market: Full Steam Ahead

A still-strengthening jobs market is good and bad news for employers.
Vincent RyanAugust 10, 2017
The U.S. Jobs Market: Full Steam Ahead

June’s Job Openings and Labor Turnover Survey affirmed what many employers are already experiencing: a growing jobs market that shows no sign of slowing down.

According to Tuesday’s Labor Department report, job openings increased by 461,000 to a seasonally adjusted 6.2 million in June. Openings are at their highest level since the data series was started in December 2000, and the monthly increase in job openings was the largest since July 2015. Those figures put the job openings rate at 4%, a level it last hit in July 2016.

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Multiple industries had job openings: there were 297,000 job openings in finance and insurance; 179,000 additional vacancies in the professional and business services industries; 125,000 more job openings in health care and social assistance; and 62,000 more job openings at construction companies.

OpinionThe numbers definitely suggest that the war for talent will continue into at least next year. According to an alert from the Institute of International Finance, the U.S. unemployment rate (U-3) might dip to as low as 3.5% to 4% percent by June 2018, “substantially below [Federal Reserve] forecasts.”

The IIF says “an unemployment rate that far below the Fed’s projections will throw up communications challenges for monetary policy,” but it could also turn into a major headache for employers trying to find skilled employees to fill their open positions.

The July report from the National Federation Federation of Independent Businesses affirms the hiring spree: a seasonally adjusted net 19% of member firms plan to create new jobs over the next few months, up 4 points from June. The last time the jobs creation number was that high was December 1999, according to the NFIB.

The NFIB data also found problems in finding workers: 60% of firms reported hiring or trying to hire (up 6 percentage points from June), but 52% reported few or no qualified applicants for the positions they were trying to fill. The difficulty of finding qualified workers was the single most important business problem for 19% of small business owners, second only to taxes.



Some experts would say it’s about time that businesses got around to doing both of those things: raising workers’ salaries and investing in training them. To which employers might respond: “We’re waiting for a bout of inflation so we can raise our prices,” or “We’re hoping our substantial investments in technology will boost productivity, obviating the need for substantial additions to our workforce.” The U.S. inflation rate has yet to comply with the first requirement, however. As for the second, it takes a long time for most IT investments to pay off substantially.

Meanwhile, jobs market strength is likely to push the Federal Reserve to raise the federal funds rate once more in 2017, in December. And publicly held companies have historically high price-to-earnings ratios, which will make them loath to cut into profits with wage hikes.

The conventional conclusion would be that something in the economy has to give: more people with jobs will boost consumer spending and corporate profits will rise proportionately, allowing for some increases in wages. And when companies are forced to poach from their competitors to fill jobs, they will have to offer attractive salaries.

Then again, a major dip in the stock market could cool business’s appetite for growth. An external shock (perhaps political?) could cause consumers to tighten their wallets considerably. The higher cost of credit could suddenly put a damper on capital investment.

There’s only one certainty: For CFOs just beginning to think about budgets for 2018, it’s going to be difficult to read what’s over the horizon.

Chart: U.S. Department of Labor