Popular Economics Weekly
Job openings rose 5 percent to 5.6 million in December, the Labor Department said Tuesday. So why are the financial markets worrying about a looming recession? That reading was the second-highest ever recorded, behind only July 2015, when it touched 5.7 million. Hires rose to 5.36 million from 5.25 million. That’s not just good news for job holders—it also shows that employers and job seekers are finding each other.
The above graph shows job openings (yellow line), hires (dark blue), Layoff, Discharges and other (red column), and Quits (light blue column) from the Labor Department’s JOLTS report. Voluntary quits also surged, rising 7 percent to 3.1 million, a sign of worker confidence. 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. … There were 3.1 million quits in December, up from November. This is even higher than in December 2007 (2.8 million), the first month of the recession, says Calculated Risk
Nobelist Paul Krugman has said it has taken this long for the hire rate to catch up to job openings because of the lack of overall, or aggregate demand, rather than structural factors. (That is, the lack of workers with certain skills.) In other words, wages haven’t been spiking in certain job categories, but have been low in all job categories.
“You see, when the Great Recession struck — a demand-side shock if ever there was one — it took no time at all for a strange consensus to develop in elite opinion, to the effect that a large part of the rise in unemployment was “structural,” and could not be reversed simply by a recovery in demand. Workers just didn’t have the right skills, you see. Many of us argued at length that this was foolish. If skills were the problem, where were the occupations with rapidly rising wages? I pointed out that people said the same thing during the Great Depression, only to see it disproved when we finally got a big fiscal stimulus called World War II.”
And even the problem of low wages may be disappearing. The January unemployment report showed consumer incomes rising faster. Though nonfarm payrolls rose just 151,000 in January, it was enough to push the unemployment down to 4.9 percent and average hourly earnings up 0.5 percent.
The 0.5 percent monthly spike in average hourly earnings may largely be due to rises in the minimum wage that are beginning to take effect, say the pundits. Hooray! This is the second strongest gain of the whole cycle, back to 2008, and means a large portion of the lowest-paid workers will finally see an improvement in their living standards.
So will the financial markets come to the realization that our economy doesn’t depend on high oil prices, as alternative energy sources such as wind and solar power begin to take over? Those falling oil prices mean consumers have more to spend on such as autos, and yes, housing. The good news is with residential housing where construction spending rose a very strong 0.9 percent on the month led once again by multi-family units. But single-family units have also been strong, up a year-on-year 8.7 percent.
And interest rates are back to record lows, including mortgage rates, which will also boost consumer spending, and keep us out any recession. In fact, this is the first time since former Fed Chairman Bernanke’s the introduction of QE3 that the conforming 30-year fixed mortgage rate has dipped as low as 3.25 percent.
Harlan Green © 2016
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