Popular Economics Weekly
Retail Sales are growing again, and U. of Michigan survey of consumer sentiment is also spiking at the right time of year for holiday sales. That’s because job openings and hires in the September JOLTS report are bringing US closer to full employment. This is especially in some high growth areas of the country, such as California’s Silicon Valley, where unemployment rates have dropped to the low 4 percent range in September.
Graph: Calculated Risk
Retail sales ex-gasoline surged by 5.1 percent on a Year-over-Year basis–4.1 percent for all retail sales—which is somewhat misleading because sales aren’t adjusted for inflation, which has been falling. Retail outlets now routinely offer 20 percent discounts for goods of all kinds, except for luxury goods, due to depressed household incomes. So sales volumes’ have probably been rising faster than the indicators.
Fallen incomes have been the overall problem, and the reason for the slow recovery, since lower incomes depress prices which leads to decreased demand for those goods and services. But the latest JOLTS report is heartening. There were 4.7 million job openings on the last business day of September, barely changed from 4.9 million in August, but the Quits and Hiring levels are surging.
Quits are generally voluntary separations initiated by the employee. Therefore, the quits rate can serve as a measure of workers’ willingness or ability to leave jobs, and is a major employment indicator liked by Fed Chairman Janet Yellen. The number of quits increased from 2.5 million in August to 2.8 million in September. This was the highest level of quits since April 2008. And companies hired 5.03 million people in September, which is the highest number since December 2007, just as the Great Recession started.
The following graph from Calculated Risk shows job openings (yellow line), hires (dark blue), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.
Lastly, the preliminary Reuters / University of Michigan consumer sentiment index for November was at 89.4, up from 86.9 in October. This was above the consensus forecast of 87.5 and is at the highest level since 2007 in this graph that dates back to 1980. So we can see that it has yet to climb above 90 to reach sentiment that prevailed during full employment periods that prevailed especially during the 1990s.
So once again, we are seeing the Goldilocks economy at work. It’s not running too hot (high inflation), or too low (there is good job creation). It is household incomes that need to rise, which should happen as we creep towards full employment. Full employment won’t be reached until the unemployment rate is in the 4 percent range these days, given the 11.1 million in underemployed and unemployed workers looking for work or wanting full time jobs.
That’s why most economists aren’t predicting that full employment will be achieved until sometime in 2016. Guess what else is happening in 2016!
Harlan Green © 2014
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