Fewer Jobless Per Opening Shows U.S. Wages May Rise: EconomyMichelle Jamrisko
The number of unemployed vying for each available job is dropping to the point that bigger wage increases are probably in store for Americans.
About two jobless workers were pursuing each opening in September, the fewest since early 2008 and down from almost seven in July 2009 at the depths of the last recession, according to data compiled by Bloomberg from a Labor Department report issued today in Washington.
The 2-to-1 ratio is the threshold that typically leads to larger pay increases in about six months as employers compete for a dwindling talent pool, according to research by economists at UBS Securities LLC. That will be about the time discussions between Federal Reserve Chair Janet Yellen and her colleagues on when to raise interest rates will be coming to a head.
“The middle of next year should really be a trouble spot as wages begin to accelerate more rapidly,” said Drew Matus, the New York-based deputy U.S. chief economist for UBS Securities. “The Fed will be more worried about wages -- and therefore inflation -- as we move toward the first tightening, which should be in June.”
Employment is tightening faster in some industries than in others, already pushing up worker pay.
In professional and business services, which includes accountants, computer system designers and technical consultants, there was just one unemployed worker in September for each opening, down from two a year ago, according to an analysis of the Labor Department data.
Wages in that category were up 2.4 percent in the third quarter from the same period in 2013, compared with a 1.7 percent increase in prior 12 months, the Labor Department’s employment cost index showed.
Retailers and employers in leisure and hospitality such as restaurants and hotels are also facing a narrowing supply of workers, leading to bigger pay increases.
“Slack in those sectors has been reduced,” said Laura Rosner, a U.S. economist at BNP Paribas SA in New York and a former New York Fed researcher. “While we might not expect wages to really take off yet, it does seem that some bargaining power has returned to worker’s side in some of these industries.”
The data show little wage pressure at manufacturers, where there are still more than two unemployed Americans for each available position.
Other reports today showed firings remain muted and consumer confidence in the economy is improving.
The number of claims for jobless benefits rose to 290,000 last week from 278,000 over the previous period, according to figures from the Labor Department. The four-week average, which strips out some of the volatility in the weekly data, rose to 285,000 from 279,000.
Americans’ views of the economy climbed last week to the highest level in almost seven years as the labor market strengthened and gasoline prices kept falling.
A Bloomberg measure of perceptions about the world’s largest economy increased to 28.9 in the period ended Nov. 9, the highest since January 2008, from 27.4. The weekly Consumer Comfort Index, which also accounts for views of the buying-climate and personal finances, was little changed at 38.2, the second-highest level since January 2008.
Stocks were little changed near record highs as better-than-estimated results from Wal-Mart Stores Inc. overshadowed losses in small caps and energy shares. The Standard & Poor’s 500 Index rose 0.1 percent to 2,039.33 at the close in New York.
Today’s Labor Department report on job openings showed employers hired workers in September at the strongest pace since the last recession began and more people quit than at any time in more than six years, showing Americans are gaining confidence that the labor market is improving.
Some 5.03 million employees were added to staff, boosting the hiring rate to 3.6 percent and matching July’s reading as the strongest since December 2007, Labor Department figures showed. Some 2.75 million people resigned in September, pushing the quits rate up to 2 percent, the highest since April 2008.
Increasing churn, with more people entering and leaving, indicates the job market is looking more like it does during better economic times. The figures are among those used by Yellen to assess the employment picture and judge whether the economy is healthy enough to withstand a rise in interest rates.
“The good news in this report is really the fact that there’s more fluidity in the labor market, more activity there,” said Thomas Costerg, an economist at Standard Chartered Bank in New York. “People are ready to take more risks and seek jobs elsewhere.”
The report also showed the number of positions waiting to be filled eased to 4.74 million, second only to August’s 4.85 million as the highest since January 2001.
“It’s more of a technical moderation than a shift in trend,” said Costerg, who correctly projected openings would cool. “The previous number had been quite strong so a modest pullback was kind of expected.”
The hiring rate in September -- the number of people who got new jobs divided by the number who worked or were paid --was still just short of the average of 3.8 percent during the previous expansion.
The number of people quitting during the month rose from 2.51 million in August.
“A jump in quits signals growing confidence on the part of employed workers that they will find another job elsewhere,” Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York, said in a research note. Resignations have “been signaled out by Yellen in the past as a variable that she would like to see increase.”
The outlook overseas is less positive. Italians are losing the impulse to take chances as the number of businesses created in the third quarter was the lowest on record for that period, while the rate of companies collapsing shows no signs of slowing down, reports showed today.
The U.S. data on job openings follow figures last week that showed employers added 214,000 jobs in October after a 256,000 advance the prior month that was larger than first estimated. The unemployment rate fell to 5.8 percent, the lowest level since July 2008, from 5.9 percent the prior month.
The October data lifted the monthly average employment gain so far in 2014 to 228,500, which would mark the strongest year since employers added an average 264,750 per month in 1999.
Pockets of Weakness
At the same time, pockets of the labor market still show weakness, with two-thirds of the gauges on Yellen’s dashboard not yet returned to pre-recession strength. The share of jobless who have been out of work for 27 weeks or longer rose to 32 percent last month, almost twice the 17.4 percent share in December 2007 when the last downturn began.
Judy Robinson from Hartford, Connecticut, a decades-long mortgage servicer who lost her job with NationalLink 14 months ago, said she’s hopeful that networking with old colleagues and realistic expectations will help yield an offer soon.
“I don’t mind going backwards a little bit -- because of this job market and because of my age, I expect that’s going to happen,” said Robinson, who last month completed a five-week job-help program targeting the long-term unemployed. “My outlook is not negative, but still nervous.”