Something odd is happening in the US labor market.
As the BLS reports in its latest JOLTS report [4], "the number of hires has exceeded the number of job openings for most of the JOLTS history" which should make intuitive sense for any normal, "growing" economy, where the labor market works as expected. However, as JOLTs also adds, "over the past year, this relationship has changed as job openings have outnumbered hires for several months."
This is how this shocking inverted relationship looks like:
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What is really happening is that hires have plateaued and at 5.049MM in September, were the lowest since April! The last time we have seen such a dramatic peak in hiring was in 2005-2006, just before the economy and the market crashed.
Is the labor market rolling over?
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The JOLTs economists at the BLS are very confused, as the following shows:
Hires exceeded job openings for over thirteen years, between December 2000 and July 2014. Job openings exceeded hires for the first time in August 2014, although hires then outnumbered job openings for the next five months. Since February 2015, however, this new relationship has persisted with job openings exceeding hires for eight consecutive months
At the end of the most recent recession in June 2009, there were 1.3 million more hires throughout the month than there were job openings on the last business day of the month.
In September 2015, there were 477,000 fewer hires throughout the month than there were job openings on the last business day of the month.
So what is going on here? Simple: a broken labor market, in which as a result of 94 million people out of the labor force, most of whom have been out of a job for years and have lost their "hirability", US businesses are unable to grow and fill open slots, as a result hiring is sliding. And, since hiring is so low, the other end of the job pipeline, separations, are also painfully low.
Which means that workers have little ability to negotiate wage hikes using the threat of quitting and finding a better paid job elsewhere, due to precisely this dislocation in the labor market.
Worst of all, with every passing month this dislocation is getting worse and continues to press down on wages: which is precisely the conundrum the Fed has been unable to solve and is the reason why the missing piece in the US economic puzzle "wage growth", refuses to appear.
