Surprising Strength in Job Openings Isn’t Good News for Stocks
Labor-market resilience adds to likelihood that the Fed isn’t done yet
By Justin Lahart, The Wall Street Journal, May 31, 2023
The Labor Department on Wednesday reported that the number of unfilled job openings on the last day of April rose to a seasonally adjusted 10.1 million from March’s 9.75 million, bringing them to their highest level since January. With the unemployment rate at an over-50-year low, that brought the number of job openings per unemployed person to 1.8…
For people now seeking employment, this counts as good news. Not so for investors hoping the Federal Reserve’s policy-setting committee will not only pause its interest-rate increases when it meets in two weeks, but stay paused…Fed Chairman Jerome Powell has repeatedly emphasized the high openings-to-unemployed ratio as an indication of how extraordinarily tight the job market is. …
The underlying message is that the job market is still very strong, and for now nobody needs to worry about it suddenly going south. They might need to worry about the Fed, though… [end quote]
Here is the JOLTS report.
Together with last week’s high core PCE inflation report, the tight JOLTS report will influence the Fed to raise the fed funds rate when they meet in 2 weeks. That will hurt the stock market.
OK, I’ll take the other side of the bet. I’m going to guess the Fed will pause, while issuing a statement that they are “carefully watching” or some such nonsense. I say this because of the stresses on banks (and indeed on debt laden manufacturers) which are becoming apparent, the (slight) slowdown in inflation, the drop in housing markets, and especially how higher rates are decimating the office real estate market. (Much of that is due to WFH, obviously, but the debt load these companies are carrying is enormous).
When the Fed “pauses” the market will (over-enthusiastically) shout “huzzah” and prices will go up, at least temporarily. Except for these guys:
Two FED governors are indicating a pause.
Since the FED is much more neutral now it wont plunge us into trouble. The late 1970s were about heading to deeper supply side recessions. Fiscal spending is our friend.
I am seeing an opportunity in crypto. I am not buying. But my NFTs may sell. I may old the Eth for a while.
The unmentioned point is simple: What skills are needed for the allegedly open jobs vs the skills of the job seekers? There may be valid reasons those jobs can not be filled…
There is certainly a skills gap, but with 10 million job openings and only 5.6 million looking for a job there would still be a 4+ million job gap even if there were no skills issue.
If the “job openings” have unrealistic requirements, then they are NOT “job openings”. It also means there are likely far FEWER job openings than people seeking jobs. So why are companies NOT hiring? Because they do not want to hire. They are trolling, just to see who bites.
It is more like there are a couple of million restaurant jobs no one will take.
Good point on the variation. Here are some labor force shortages by sector:
Wholesale & retail trade 35%
Durable goods & manufacturing 40%
Professional & business services 60%
Leisure & hospitality 60%
Speaking of “skills”…
Marlin TX has ~40 high school graduates this spring.
Only 12 or so actually have passing grades, therefore, the ISD chose to delay graduation for a month or so, to allow the “failures” to retake tests, and “pass”, and graduate.
Marlin has long had a reputation for poor education.
The graduating classes this spring, are the first high school graduates coming out of the COVID “study from home” cohort.
There will be a “tail” as the lower grades move up, and work their way to graduation.
I imagine that there will be a higher than normal number of low skill workers in the next few years.
The societal ramifications that I imagine, rapidly become dystopian.
Optimus will have tail winds?
There is significant variation from place to place. I have commented before that the two Arby’s that I visit are well staffed, always have the dining room open. BK closes it’s dining room only rarely. Wendy’s is chronically so short staffed they rarely have the dining room open. One Wendy’s, that has newly installed dining room order entry kiosks, does not man the counter at all, on the occasions that they unlock the dining room.
Maybe grads from Marlin (and similar schools) don’t meet the employers’ minimum employment requirements.
Wholesale/retail: Likely fairly low skill jobs
Durable goods & manufacturing: Decent “shop” skills. Academic skills, not so much. Biggest skill set is the one that keeps you from getting your hand chopped off while using or monitoring machinery.
Financial: Probably college educated.
Professional & business services: again, probably college grads.
Leisure & hospitality: Not much skills here. The shortages are likely due to low pay and/or poor working conditions.
The current skills gap, as it were, is so big that nearly half (44%) of individual workers need to be upskilled to do their jobs effectively, according to the World Economic Forum’s 2023 Future of Jobs Report.* Workers are well aware. More than a third (37%) of Gen Zers feel their education didn’t equip them with the tech skills they need to advance in their careers, according to a Dell Technologies survey. The evidence is clear: Companies need more specialized expertise than most workers can provide.*
Corporation will have to find a solution or they will take productivity hit that will reflect in reduce national GDP growth and perhaps poorer stockmarket returns.
Workforce development is a tough nut to crack. You can offer all the training you want, but the vast majority of potential workers either won’t take it or won’t compete it.