U.S. Job Market Only Looks Good on the Surface
Not too long ago, we heard the mainstream media buzzing about how strong the U.S. job market is and how it could be great for the economy. But don’t get too distracted by the noise. There are some problems that continue to get ignored.
On February 2, the U.S. Bureau of Labor Statistics (BLS) reported that the U.S. economy added 200,000 jobs in January 2018 and that the unemployment rate continued to be 4.1%. (Source: “Employment Situation Summary,” U.S. Bureau of Labor Statistics, February 2, 2018.)
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But you see, those numbers on the surface aren’t telling the whole story of the U.S. job market. It’s important for investors to dig a little into the details. When they do that, all of a sudden, a lot of problems start to show up.
Job Openings Growth Rate Takes a Tumble
As it stands, we are seeing job openings in the U.S. economy take a tumble. Please look at the chart below. It shows the year-over-year percentage change in monthly job openings in the country.
(Source: “Job Openings: Total Nonfarm,” Federal Reserve Bank of St. Louis, last accessed February 7, 2018.)
Going back to 2014, there were plenty of job openings. Since then, the growth rate of job openings has stalled severely; it was 25% then and now it’s five percent. This represents a deceleration of 80% in job openings in the U.S. economy.
Mind you, in early 2017, we actually saw job openings decline. This was the first time since 2010!
The job openings statistic is an indicator of how the job market could look in the coming months and years. If this figure is increasing, it says that employers are looking to hire and that the labor market situation could get better.
Layoffs Making Up Huge Portion of All Unemployed
There’s one more chart that investors need to pay close attention to. Look below:
(Source: “Job Losers on Layoff as a Percent of Total Unemployed,” Federal Reserve Bank of St. Louis, last accessed February 7, 2018.)
The above chart shows something that’s usually not discussed in the mainstream media. It essentially shows the percentage of unemployed people who lost their jobs due to layoffs.
In 2011, this figure was around eight percent. Now it is at 14%. While the increase may not seem big, know this: it’s the highest percentage since the recession of 2007–2009.
What’s Ahead for the U.S. Job Market?
The noise will have you convinced that everything is great. Don’t get too excited by that; it tends to be wrong at times.
Dear reader, the problems in the U.S. job market may have gotten smaller, but they haven’t disappeared. Job opening and layoff numbers are saying that we are not headed in the right direction.
Obviously, with time, we will know more. In the meantime, keep the big picture in mind.
Currently, the Federal Reserve is raising interest rates in the U.S. because it wants to control inflation. No matter what anyone says, this could really impact businesses in the coming quarters. They may need to cut costs to pay higher debt payments, and the easiest way they can do this is by reducing their staff. So, a dismal job market could be ahead in the wake of all this.
