There is a direct correlation between the increase in job openings announced in the Labor Department’s JOLTS (Job Openings and Labor Turnover) report, and declining household debt. How so? The increase in job opportunities—the number of job openings (yellow in graph) is up 7.6 percent year-over-year compared to January 2013, and that is enabling more households to pay down their debts.
This is while the Quits number decreased in January but is up about 3 percent year-over-year. These are voluntary separations, and mean workers are seeing more job opportunities that make them willing to leave their current job. (Light blue columns at bottom of graph is trend for “quits”).
And household debt, as measured by the Federal Reserve’s Household Debt Service Ratio of mortgage and consumer loans to Disposable Income, has been declining steadily, and is now below 1980 levels. This is freeing up consumers’ incomes to spend more, needless to say, and a sign of better economic growth for 2014.
Sure enough, employers added 175,000 jobs to their payrolls last month after creating 129,000 new positions in January, said the Labor Department last Friday. The unemployment rate, however, rose to 6.7 percent from a five-year low of 6.6 percent as Americans flooded into the labor market to search for work.
This is even though 601,000 people could not get to work because of the winter weather, the highest level for February since 2010. Some economists said job growth in February would have been as high as 200,000 if not for the weather.
And the smaller survey of households from which the unemployment rate is derived showed 6.9 million people with jobs reported they were working part-time because of the weather. That was the highest reading for February since the series started in 1978.
So even the winter weather isn’t slowing down appreciable growth. And consumers now have more money to spend. So watch out, trendsetters and economic forecasters, when the Spring thaw sets in!
Harlan Green © 2014
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