By: Dividend Sensei
In my last article I explained the likely reason that wage growth has been so disappointing for so long but why it’s likely to accelerate significantly within a year or two.
Well in case you think I’m being overly optimistic let me present some important evidence that points to good times ahead for workers, the economy, and ultimately the stock market. This news comes from one of the lesser known economic reports, and is far less famous than the monthly jobs report. However it’s arguably as, if not potentially more important. I’m referring to the monthly JOLTS or Job Openings and Labor Turnover Survey. The JOLTS report is issued by the Bureau of Labor Statistics or BLS, the same government agency that publishes the monthly jobs report. This report tells us three important things.
First it reports the estimated number of job openings in the country, per the government’s representative survey of businesses and government agencies. In April the BLS estimates there were 6.6 million job openings, up 267,000 (or 4.2%) since March. This is the highest level of job openings since the JOLTS report began in December of 2000. This tells us that the demand for workers is literally the strongest it’s been in nearly 20 years and signals the US economy continues growing robustly.
The second important thing the report tells us is what sectors are creating the most openings. In April the three top sectors looking for new workers were:
- Professional and business services: +112,000
- Construction: + 68,000
- Transportation, Warehousing, and Utilities: +37,000
What is important to note is that most of these new openings are in relatively high paying white and blue collar sectors. Which means that if these jobs can be filled wage growth is likely to accelerate from its rather anemic 2.6% pace.
Most important of all is the quit rate, or how many employees are voluntarily leaving each month. That’s either because they have already found another job or because they feel so confident that they can quickly find one that they leave to go job hunting. In April 3.3 million workers quit, representing 2.3% of employed Americans. This is the highest levels since September 2005, which was the peak quit rate pre-recession.
Note that in April there were a total of 5.4 million hires, and 5.3 million job separations, meaning firings, workers quitting or companies eliminating jobs due to bankruptcy. The +164,000 jobs report figure is the net figure. In reality the American economy is constantly turning over jobs at a pace that is surprising to most people. For example in the past 12 months 63.4 million people quit or were laid off. But since 65.7 million people were hired the economy had a net job gain of 2.3 million or 192,000 per month on average (the official jobs report figure).