Following the surge in overnight screams against a rate hike, which in just the past 24 hours has added those of the World Bank's chief economist, Paul Krugman, and Larry Summers (for the second time), all eyes were focused on Janet Yellen's favoriote Jobs indicator - the JOLTS report, and especially the total nonfarm Job Openings. And here a big problem appeared because while the Fed is now facing tremendous pressure from the outside not to hike in September, the JOLTS report not only gave a green light, but literally shrieked a rate hike in September is inevitable.
The reason: the Job Openings number soared from 5.323MM to a new record high of 5.753MM, smashing expectations of a drop to 5.3MM. In fact, the monthly increase in openings of 430,000 was the highest stretching all the way back to April 2010, and was the fourth highest monthly jump in the history of the series!
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To be sure, a more than cursory scan at the components of the jump reveals that not all is well: for example the job openings were all quantity, and zero quality: the biggest increase among "job wanted" poasters was for low-paying jobs (just in case anyone is still confused why there are no wage hikes), including retail trade and leisure and hospitality.
Furthermore, the level of hiring is clearly tapering off, and 4.983MM was the lowest since last August, confirming the lagging nature of jobs data, which is now rolloing over and leading to continued decling in wages for non-supervisory workers [8].
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And then there was the "quits" indicator - the best metric of how much job confidence employees really have, as a jump in quitting (as opposed to terminations) suggests workers have substantial faith in their skillset and that they can quickly find more lucrative jobs elsewhere. This too slumped in July, and at 2.685MM was the lowest print since November of 2014.
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But to the Fed all that is largely irrelevant.
What does matter to Yellen is that the ratio of number of unemployed people per job opening is now back to pre-crisis levels. To wit: "when the most recent recession began (December 2007), the number of unemployed persons per job opening was 1.8. The ratio peaked at 6.8 unemployed persons per job opening in July 2009 and has trended downward since. The ratio was 1.4 in July 2015."
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For Yellen, this will be evidence that virtually all the slack in the labor market has been removed and if wage growth just refuses to materialize, then so be it.
Which means the Fed's boxed-in problem just got even bigger: will Yellen defer the rate hike because of outside influence (and the market tantrum of course) and be widely perceived as a mere puppet of others, or will the Fed not lose any more credibility, and rely on the data - as it has promised repeatedly it does -and which as shown above, is now shrieking a rate hike is long overdue. Find out next week.
